Waiting for the bullish 5th

Not much to add today as the market traded in a narrow range most of the day. I think the market has corrected enough in time and many of the oscillators that were short term overbought couple of days ago are now neutral. So the market just needs an excuse to rally from here and put in the 5th wave. I am assuming the Feds will not announce Q3 but will give a signal that they are ready to act if the economy shows signs of a further slowdown. That in itself should serve as an excuse.. we'll see.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

One more push to 1400?

The market barely made another higher high but it was within the 1388-1392 range I mentioned couple of weeks ago and it looks like a W4 set up for a final W5 push to 1400+. The FOMC meeting will likely be the excuse for a rally, so I would expect a rally to start in the next session or two before profit taking starts taking place sending the market to test the Trend Average. And if that TA holds, then it just opens the possibility of a strong bullish wave that will mark a new high for the year. The bearish case only has a chance if it manages to send the market below the TA and the 50 day ma, until then the way is up. So if you like shorting, at least do it below the TA and not when the market is galloping.. you'll sleep a lot better.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

Target reached.. but higher highs ahead likely

I posted the 1388-1392 level over one week ago and today we finally reached it after the market managed to fool both bears and bulls earlier this week. And just like I said yesterday, higher highs were likely and they continue to be highly likely going into next week. And if Gold breaks out, you can bet the stock market is headed for new highs for the year.

I didn't get a chance to short (to hedge) today at my 1388 target because I was away from the computer but I'll probably get a chance next week. And to people trading against the trend, just be careful. I know a lot of traditional Elliott Wave counters are very bearish and are betting for a cataclysmic sell off very soon.. but I wouldn't bet the house on that just yet.

Here is an article from the one institution who can be credited for making wave counting popular. Yours truly thinks they are a FAIL because they disregard the trend completely. However, in times where the trend is BEARISH (not bullish like it is right now), then this principle of the W3 applies..

The Drop Like a Rock Scenario for U.S. Markets

Third waves are "wonders to behold"
July 27, 2012

Have a Great Weekend!

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

Bullish again

I said yesterday that these next few sessions were the bears best chance to make their case and today it seems like they threw in the towel, so now we're back where we were 4 months ago. And as I have been saying, if lower lows can not be made then prepare for higher highs as there will be a break out sooner rather than later. I've also been looking at gold and it seems like it is about to break out of its range and in turn confirming the markets anticipation of more liquidity. So it'll be interesting to see if gold breaks out in the next few sessions before the Fed meeting next week.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

Market Update

The market failed to make a lower low today which alleviates the bearish damage in the last couple of days. But at the same time the market could just be taking a breather before plunging into the abyss. And looking at the chart, one could argue for a bearish or bullish nested set up so this couldn't be more 50/50. I think the test will come when the trend average gets tested, if the market manages to capture the trend again then this was all just a correction. But if the market can't get past the TA then odds will favor lower lows.. for now, I think the bears have the best chance to make their case in the next few dats. The Feds will be meeting soon and there will be a big rally a day or two before it due to the Q3 expectation.

Long Term Portfolio: 66% Long
Short Term Trading Strategy: Sidelines

Short term bearish trend confirmed

The market failed to bounce and instead it made a lower low at 1329. And if the market breaks the previous wave low of 1325 the weekly will turn down and odds will favor a test of the 1300-1310 level again. The short term trend has turned bearish and the market must need to gain back lost ground quickly to maintain trading in recent levels. Looking at the waves it seems like we might get a bounce as soon as tomorrow to the TA but with Apple missing earnings, the mood will favor more selling.

I made an adjustment to my portfolio to reflect the trend change.

Long Term Portfolio: 66% Long
Short Term Trading Strategy: Sidelines

So much for the 5th wave..

Today is one of those days that shows the problems of using wave counts to trade. We had a nice 4 wave sequence but there was no 5th wave as anticipated and I think we've seen this several times already this year. And this just reinforces the limitations of using wave theory alone as a tool to trade, especially longer time frames. With that said, the market does follow a pattern more often than not and as traders we're just trying to find positions with favorable odds.

I want to see what the bounce will look like before labeling the chart again, so today I posted a longer term chart and the channels the market seems to be obeying. Notice the lower support channel the market seems to be finding a floor during sell offs. If this channel breaks, then we might see a new downtrend develop. So we today we had a bearish day but it is still questionable as to how bearish. The market closed under the trend average at 1356 and another close below it should be enough to change it to the bearish side. However, until the market starts closing under the 50 day ma (1333), the market is still bullish.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

4 Waves

The market finally corrected today and now we have 4 clear waves on the chart. So we could (and should) see a 5th wave materialize early next week to complete this wave from the 1325 low. One thing to keep in mind is that w1 was 32.5 points and w3 was 35 points. So a 5th wave would have to be more than 32.5 points going by wave theory. If we add 32.5 points to the low for the day (potentially the low for w4) then we get at least 1395, so early next week should be fun if the 5 wave move completes. Now, there have been recent 5th wave failures so anything can happen next week, but this is all about odds.


Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

Have a great weekend!

Bullish Wave 3?

The market continued the rally today and it got closer to my 1388-1392 target, which could be reached tomorrow if the current Wave 3 continues. But the real question is whether this is the first leg of an intermediate Bullish Wave 3, the daily chart shows a bullish nested set up and unless a lower low is made on the next bearish wave, we will see a new high for the year as soon as August. Also, some of you might have noticed but I stopped posting my trades as it is too time consuming and has no real reward for doing this. However, what I'll do from now on is post my core positions so you'll see where I am at with my trades.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Shorting intraday extremes, closing same day

Next target 1388-1392

The market took out the 1374 top by a hair today and it seems like the next target is 1388-1392. I removed the 5 count label as I rather see more price action before continuing to add labels, sometimes counting waves can confuse your trading so I rather feel confident about a count than start guessing. What we do know now is that all trends are pointing up and the market is approaching the upper band of the channel that starts from the 1309 low. If you look at that chart (the daily), you can see the market might be in a double nested bullish set up which has the potential to break that upper band in a bullish Wave 3. And I guess if the Feds announce Q3 or the market places a high probability of Q3, we will be heading to new highs. I am aware of the bearish Elliott wave counts out there, which are probably the great majority of wave blogs. But I continue to warn people to not put your money on these long term orthodox counts that are calling for a bearish "Primary 3" when all trends clearly are signaling NOT to be short. I've seen that P3 count since 2009 and 3 years later (and God knows how many $ millions lost by short traders), I still see the same exact mistake.

So yours truly has been and is staying long but hedged today and took some profit on the dip. We might get a correction to the TA or we might continue to rally to the next stop before correcting. The safest bet would be hedging (and staying that way) at TA + 2(VIX).

1365 reached

The ascending triangle I posted about yesterday did not exactly turn out as projected. However, the 1365 level I mentioned yesterday was reached in today's high. And now that we have 5 waves in, I am expecting a correction. So we should get a W4 or a W2 and if you're on the bearish side then a sell off. Yours truly thinks the market is going higher until trends reverse and as long as the market trades above the trend, we are going towards 1400.

More upside

The market managed to hang around the trend avg today and closed slightly above it. And in looking at the structure, it seems like there is an ascending triangle in play that is targeting 1365 and we should see this tomorrow if the pattern plays out. We're now more than half way through the month and the markets are about the same levels when the month started, which just favors the bullish side due to the lack of bearish advances despite several sell off attempts. Maybe the markets will start making big moves after the FOMC meeting in couple of weeks.

Strong rebound

The market made a strong comeback today by rallying all the way to the trend and closing right above it. Given the strength of the rally, it could signal the start of a 5 wave move to the upside but it is premature to count it as such until 1375 gets taken out. However, looking at the daily chart one can see a series of higher highs and lower lows so the market looks like it is going for 1422 and I expect it to do so as long as the intermediate trend remains positive. Therefore, I continue to be long and hedging only at bullish extremes.

Have a great weekend!

Bearish short term trend change confirmation

The market managed to put in its 6th consecutive down day and it left one ugly wave to count. I'd have to get very creative to put labels on it and I rather not so I'll just leave it as it and see how the bouncing wave evolves. The close under the Trend Average and the 50 day MA leaves the potential rally under pressure as the short term trend now is confirmed to the downside. Also, the daily MACD is rolling over so there might be more downside ahead. However, the larger trends are still going up and unless the bears can truly make advances to the downside, specifically closing under the 200 day MA, the last 3.5 months has been a correction and not the start of a bear market.

The wait continues

Today the market put in another lower low for this wave but it quickly reversed to close above the 50 day MA. So one could argue there are enough buyers at the this level, however the market has closed 2 days consecutively under the Trend Average so there is a potential bearish trend change if the market closes below it again tomorrow. Also, the 5 wave count was technically invalidated because Wave 4 went into Wave 1 territory. So now the wait continues as we've been trading in this range for 3.5 months now.

Lastly, it was interesting to read the Fed minutes today. I think the fact they are not announcing Q3 is actually good as they see some strengths in the economy. By doing Q3 the market would go up just to catch up with expected inflation and it would signal the economy is indeed deteriorating fast. By holding, they are signaling there is no need for support which is good for the economy in general.

Stalled Rally

The market seemed like it was going to rally at the open but it reversed quickly so the correction continues. The lower low (which tested the 50 day ma) on this wave almost went into Wave 1 territory but it did not, so the count remains valid. However, if the market does not start the 5th wave pronto then it risks rolling over to the downside. The market closed under the TA but trend reversal is not confirmed. Also, the lower channel from the 1266 wave remains clear so we'll see if it continues to hold.

Still on Wave 4

The market put in a slightly lower low today and tested the Trend Avg yet once once again but closed above it. So this correction in time and price has reset most of the short term overbought oscillators and we could see a bullish wave start as soon as tomorrow morning. The real question will be what happens once the final 5th wave is put in to this wave. Will the market correct and continue the sideways correction that has been in the works for over 3 months now or do we get a strong bullish wave to new highs? going by the news (or most Elliott Wave counts) one would think we're about to fall off the cliff. However, looking at the trends they are clearly pointing up so I suppose this will be an instance of this system proving itself.

Wave 4

The market tested the Trend Average today and it seems like the C wave of a Wave 4 was put in. And the market should be ready to start the final 5th wave as soon as early next week unless the market does a complex correction. Alternatively, one could make the case for the market about to impulse (W1-2-3 instead of the ABC labels on the chart) down but so far this remains a correction. So I am hoping for the market to reach my target area of 1378-1388 before doing a Fib correct of the entire wave from 1309.

Have a great weekend!

Intermediate trend bullish confirmation

Not much to add today since last week's forecast seems to be in the works. The market is in a W4 and the intermediate trend is now bullish, so all 4 trends I follow (long term, intermediate, 13:34 EMA and Trend Average) are firmly bullish. So I expect the market to correct a bit more in pre-market or tomorrow and then start the 5th wave to the target area I had last week (1378-1388). I've been long and staying long but will short to hedge once the 5th is finally in.

Higher highs

The market did a good job and actually almost reached the lower target I had of 1378 and it might just get there in the next session before we get the W4. Whatever it is, so far this wave that started from 1313 is 2.48 of W1 and 1378 would be exactly 2.618 thus my target. And given how strong this wave is, I favor a W3 and not a C wave which would indicate higher highs ahead and not only after we put in the W5 to this bullish wave but to the entire intermediate structure. I have been procrastinating on doing the longer term count but when I look at the daily chart, I can see how this wave that started from 1309 could be W1 of an intermediate W3 and if that is the case then 1500 is a given. The trends definitely support it but obviously we'll have to wait to see.. the factors that don't support it are the current headlines but like I've said before news are not exactly the forefront of the stock market so who knows, maybe by Christmas (if the Mayan prediction doesn't pan out) the EU problem will be gone, China will be growing fast again and so will the US. Hope for the best, prepare for the worst..

And speaking of preparing for the worst, here is an article by EWI which are a bearish bunch.. but if you would like that stuff, you can feast on it with the info below.. (just don't buy into their DOW 400 target! they're out of their minds)

Happy 4th of July!

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World's 15 Biggest Banks Get Downgraded -- What This Means for "Safe Banks"

Another one of Robert Prechter's Conquer the Crash forecasts comes true
Elliott Wave International

1378-88 target?

The market continued its W3 advance and from what I see on the minute chart it seems like we'll see the W4 in the next session or two. If the trend average holds then I expect the 1378-88 area to be challenged. Ideally this bullish wave would top there as that is the upper band of the bullish channel from the 1266 low so we'll see how the W4 evolves. And as long as the trend average holds I expect the 1422 high to be broken eventually as the intermediate trend should change to the bullish side in the next couple of sessions. So unless the trend signals get whipsawed, enjoy the ride! And again, wave counts, divergences, etc. are fun but the trend is clearly up so don't get run over if you are short. I know the end of the world is coming soon (With the US collapsing, China imploding, Europe disintegrating, etc.) according to some people but yours truly has been and is staying long.