Market Update

The market finally made a stronger move today and made a lower low for the correction that started 8 trading days ago. It seems like the market is trying to price out any potential disappointment on the QE3 announcement, however the bearish move was held by support and this still continues to look like a W4 until 1391 gets taken out. Tomorrow should get interesting..

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

S&P 500 to 1450?

The market did not do much again today other than further its correction in time. So I am now expecting the market to launch a wave to challenge 1426 once this sideways moves completes. Fundamentally speaking, I don't think the market should be this high right now but maybe this is just a sign that the economy will be much stronger six months from now? who knows. But if the long term count I posted today is right, then that just might be the case. Based on the length of Wave 1 on the chart, if the bottom for W4 (and so far this is looking like a W4) is already in then we should see W5 end in the 1450+ range. I don't like to trade on long term counts but this is the one that we should keep in mind as long as trends remain bullish.

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

Bullish or Bearish W2?

The market follow through somewhat with the bearish wave that started yesterday but it quickly found support early morning and I am sensing the same type of ambivalence we typically find on a W4. One could argue for an Head and Shoulders formation targeting the Fib retrace territory but at the same time, the quick low today could also be the "head" of an inverted H&S formation targeting 1434 so things are still up in the air. And to add to the suspense, I can see a W1-2 to both the bullish and bearish side so I think we will see a strong wave(30+ points) breaking out very soon. The short term trend is still slightly trending up despite more than 2 closes below the TA and this is due to the fact that the bearish closes have been so close to the TA that it doesn't allow for the trend doesn't turn down. So today I decided to sell my hedge at break even and will re-hedge if the low today gets taken out.

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

Watching coming bearish wave

The market finally closed under the trend average for a second time today, so we could technically label this as a confirmed bearish short term trend change. However, the only issue I have is that the TA has not started sloping down yet one could make the argument that we need an extra bearish day for a valid confirmation. And I think we will see that extra confirmation tomorrow as the bounce wave seemed to have topped today and there is a bearish MACD cross on the 30 min chart. So I am watching just how strong this coming bearish wave will be. If it looks like the ABC wave from 1426 then we will have a double ZZ and the correction should end around the Fib retracement area/50 day ma. However, if we see a strong sell off then we might be in for a much stronger correction that will challenge the 200 day ma. For now, I continue to hedge my longs so we'll see what the next few sessions will bring.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX as of 08/24/2012

Short term trend

The market made another lower low and it bounced back to the trend average as I was predicting. However, it closed right on the TA so the change of trend did not occur so we'll have to wait until Monday to see if the wave I've labeled X is part of a complex correction or a W1 of an bullish impulse. I went hedged just in case and will be setting my stops to break even as soon as the markets starts its Fib retracement or if it continues to sell off, at this point I am more concerned with protecting my profits more than anything else.

Have a great weekend!

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX as of 08/24/2012

Correction

The market follow through with its selling today by making new lower lows and I think it's likely the short term trend will change tomorrow. So I might be using the test of the TA to hedge or sell 1/3 of my long positions. Yesterday I mentioned we had the EW scenario and the trend avg/macd signal and today I will log it as a signal failure to start keeping track of these signals as there is no research records on it at all. So next time (after a substantial sample) I see this scenario, at least I will know what are the odds. So for now the correction continues in the stock market while gold continues to break out, so we'll see if they start trading in tangent like they did earlier this years.

Gold break out and the stock market

Few days ago I mentioned the market was likely to test the trend average after making some sort of top and today the market corrected 20 points to 1406 before bouncing to its Fib retracement level and closing above the TA. It still remains to be seen just what kind of correction this is (or was) as this could well turn into yet another W4 correction before putting in another W5 high. Alternatively, it could be setting itself up for a bearish leg that will start closing under the TA. Today's chart reflects the differences between using wave counts vs trend averages. If I were just counting waves, I would assume the leg from 1426 to 1406 was an impulsive wave and that we are now on a W2 or B wave before seeing a bearish W3 or C wave. However, looking at the trend average and the MACD (which is moving average based) indicate the market remains bullish and is ready for another bullish wave as soon as tomorrow morning. In my experience, odds usually favor moving averages so I'll assume the market is trying to go over 1420 again. Also, gold broke out today out of an apparent ascending triangle and that confirms the markets are trying to price in QE after the Fed statement so this could well spill over onto the stock market at any moment.

I sold my VXX hedge today at the low, bought them back and then sold them again at the close for more coffee money :) So now I am back to 100% long and shorting/hedging overbought intraday prices.

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

A Good Day

The market challenged and broke 1422 today exactly as I had posted yesterday and now that bulls have proven their case, the market seems to have started a correction. What type of correction this will be remains to be seen but let me make it clear that trends have been pointing up for weeks and if the market finds support at the 50 day MA, then the market will likely go much higher. The market could also try going for the 200 day MA just like it did for 1 day in the summer, but first I'll be watching the 50 day MA currently at 1365.

Also, I wanted to post this comment I made 4 months ago when the market was around 1400 and before the market started its correction. All the selling, bearishness, "P3", etc. started about the time I posted this comment. And what the market did during all of these 4 months was just that.. a test of the 200 day MA when it was in the 1280's for a single day and then resumed its uptrend.

Elliott Wave Update ~ 13 April 2012 4 months ago
Ideal would be a test of the 200 day MA

I try not to rely too much on long term wave counts, oscillators, divergences, sentiment, patterns, moon, sun, mars, etc. as the trend blows all of them away (as shown during this correction and the other ones before that). This has kept me in the right side of the market and out of trouble since I first started following my system back in 2010. In fact, during this summer correction I've seen many respectable names and many sites failing in their forecasts. Prominent market commentators such as Art Cashing, Dough Kass, Faber, etc. in addition to many sites with really good looking charts and great typo-free commentary somehow "missed" the rally. But I guess these are the types of environments where a system is "proven" so today I get some extra joy for knowing I've got something that really does work :)

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX as of 08/16/2012

Last bullish wave before correction?

The market put in a W4 on the minute count on the chart and W5 should be in tomorrow or in pre-market. And we'll see if the market can overcome 1422, if W5=W1 we actually get 1422.. and then we should see the bearish response that will probably set the tone for trading in September. If the market is able to find support anywhere above the 50 day ma, the market is likely to continue to new highs. If not then down we go but I hope the market is making a turn for the positive as an indication that our economy will start doing better next year.

Coming bearish wave

I posted last week that 1422 was going to be possibly challenged this week and the market got very close to it at 1419. And judging by the way the market closed, we might see the market make a new high for the year early next week. But what matters now in my opinion is the coming bearish wave. I've read on several mainstream sites on how this bullish wave caught many off guard - they obviously were not reading about my posts :)- so we'll see if the crowd makes the jump after the first correction. I expect a correction sooner rather than later to the trend average but ideally it would be better if it did a proper Fib correction as those are the levels that should attract buyers who felt they missed the rally. If those levels do not attract enough buyers then we'll be in for a much deeper correction.

Have a great weekend!

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX as of 08/16/2012

Finally!

The market finally broke out of its trading range and now it seems like it is going for 1422 as I posted last week. What I am really paying attention to is what wave we get after this bullish wave is done. If we get a Fib retracement and the market manages to come back and capture the trend average again, then the market is going towards 1450+. But if the retracement finds resistance at the TA, then it will go for a deeper correction. Regardless of what news we might have seen this summer, the market was as I have been stating for months in a correction within a bull market and my expectation is for higher highs until major trends change to the downside.

Today I started hedging my longs with VXX at $11.58.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX

How much longer?!

I don't know the official stats but I think the market managed to set some sort of record today. The market remains stuck in the same range we've had since last week but perhaps we'll finally see buyers jumping in tomorrow, I just can't imagine the market doing another sideways move. The market could easily now take on 1422 on the next bullish wave as recent gains have been solidified and now the market has a base to rally from. The trend average has risen to 1401 and the market could test it again but for all intent and purposes, it is ready for a rally. I'd be surprised if the market fails to challenge 1422 in the next few sessions.

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

Breakout

So yesterday I posted about a very likely breakout for the markets and today we got somewhat of an attempt. A higher high was put in but there was lack of impulse so this left the market in pretty much the same range as in the last 4 sessions. I see a W1-2 count with 1410 as W1 and if this count is correct then we gap up or start a strong rally tomorrow. If the market can not overcome the higher high put in today then the market is going for the trend average at 1397, which could be a good spot to take some profits/hedge for at least a proper Fib correction. The market needs some sort of excuse to either rally or sell off at this point as both sellers and buyers are holding off. However, the ideal scenario would be a rally to complete the minute wave count and then call it a top.. we'll find out tomorrow hopefully.

Coming Market Breakout

The market managed to extend its sideways corrections for the fourth consecutive session in a tight range. And I don't remember the last time this happened, the closest thing I could find was a somewhat similar period in February where the market broke out of its four day range and went up close to 30 points. However, the difference is the market is coming out of a 4 month correction whereas in February the market had been in a strong rally for 2 months. So I think the coming bullish breakout (I'm 90% sure it will breakout of this range to the upside) should be closely watched. The lack of sellers in the market means traders are no longer bearish as they were a few weeks ago. And the lack of buyers just means there are a bunch of people who missed the rally and they might just jump in desperation should the market breakout strongly. So a breakout with strong volume will mean the market is going north of 1450. The VIX has crashed to its 52 week low and the only fear left is the one of people who don't want to miss the rally (or being caught short). I originally wanted to hedge my longs overnight on the next bullish wave but now it's probably better to wait and just keep riding the TA. It'll be interesting if tomorrow we get another sideways correction.. the longer the wood dries, the more intense the fire.

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

1422 to be challenged next week?

The market managed to extend the triangle yet another day and in doing so continuing it's sideways correction, which is typical of Wave 4s. So I think odds favor a somewhat strong bullish wave early next week given the fact that there was close to zero bearish advance during this correction time. This is the main reason I avoid shorting W4s when the trend is going up as they can just tease you and then really screw you (and not in a good way). It's hard to tell just how the next bullish wave will evolve but if we go by my TA + 2(VIX) formula then the market should challenge the 1422 high next week but first it will have to overcome the 1415 resistance level. And should this wave come to reality, I'll probably load up on some shorts/volatility and hold overnight to hedge as we should then get a proper Fib correction after that wave. So I'm hoping for the 5th to appear, if not then the market will be testing the TA early next week and that will be a time to re-evaluate some of the long positions.

Have a great weekend!

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

Triangle, Long Term Count

The triangle that formed yesterday expanded into a bigger triangle and that increased the odds of a bullish wave coming next. So I removed the W5 label and I'll assume this is a W4 of W5 which should see the ending around 1415-1422. If it break through those resistance levels then good, if not then the real test is the correction to the trend average.

I also had the chance to chart the long term count for the market and here is the most bullish option. The market is obviously in a broadening formation pattern and the interesting thing about this particular set up is that it has a 50/50 chance of breaking out. Gold was in this pattern few months ago before it exploded but obviously, this is just for entertainment purposes because I would never trade or invest based on a long term wave count. But as long as the trends remain up, this is a chart to consider as a guide. Also, after 12 years of a sideways correction which has left a clear ABC move, I wouldn't be surprised to see the resumption of a strong bull market. And I'll post the bearish long term alternatives when the trends turn south. But for now, this is the one to watch. I know the most popular wave counts are the bearish ones but they all have proven disastrous to many traders so we'll try making money here for a change :)

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

One more push up?

The market took a breather today as expected but it is now in a triangle, which implies this could just be a W4 of the 5th wave. And if this is the case, we should see another bullish leg tomorrow morning. If not, then I expect the market to correct to the trend average at the very least which has now climbed up to 1385. Oscillators have reset enough for a new bull wave so we'll see if the market can challenge 1415 and eventually 1422. I wanted to trade today (short to hedge) but the only chance I had was early morning while I was still sleeping.. oh well.

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

Bullish pressure

The market continued to follow through by making a higher high today and I am expecting a bearish wave any moment now to reset some of the overbought conditions. However, since there is the possibility that we are on a Wave 3 and not the end of a Wave 5, the market could keep on rallying to challenge the 1422 year high before taking a breather. The market could technically get a lot more overbought so I am sticking to my strategy of staying long and closing my short hedges by the end of the day, which has resulted in couple of more months worth of starbucks coffee for me today :)

Fundamentally speaking, the market is usually ahead of the news so perhaps there will be a turn around from the negative news and we'll see again headlines of a "recovering" economy. And if we get relatively good news on economies around the world, the market will surpass its all time high regardless of what bearish count anyone thinks we are on.. mark my words. Stay with the trend!


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

1400 target reached

I fist mentioned the SP 1400 target on June 15th when the market was about to recapture the 50 day MA and today we finally reached that target - if we round up 1399.6 we get 1400 :-) and now the next target will be the year's high which is 1422. I decided to label the latest wave a 5th and now I expect a proper Fib retracement and a test of the trend average. If key support levels hold, specially the TA, we are on to new highs for the year. If we lose the TA then bears might still have a chance but for now it's all about enjoying the market ride.

I shorted to hedge today but closed positions a bit too soon but still made enough for
my starbucks coffee fund for the next two months.

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

This bullish wave

I pointed out yesterday that trends were still pointing up and how it was premature to assume a "top" was in because of the sell off and look what happened today. The market managed to make a higher high and it looks like it really wants to go for 1400s as soon as next week. And technically, the market could be on that Wave 5 I've been talking about since early in the week or on W1 of a bullish Wave 3 so it's still too early to tell what's coming next. What we do know is that all trends are bullish and the market managed to reset some of the overbought conditions from last week, so there is room for the market to go up before being in overbought territory again.

Have a great weekend!

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

Coming Bullish Wave

So the 5th wave rally I had been expecting failed to materialize after the FOMC and ECB meetings and instead we got somewhat of a sell off today. However, the market recuperated and bounced back to close right on the trend average. So it is premature to assume some sort of top is in as I have been reading on the web, the trend continues to go up and the coming bullish wave should gives us an idea if the correction is over by making higher highs. The wave count actually still stays the same using wave counting rules since W4 has not gone into W1 but the structure looks off with those labels, so I will see what comes next and label accordingly to avoid a bunch of different counts that might just create confusion.

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

More of the same

I will be the first to admit that I was wrong in my prediction of a Fed rally, the market had a small negative reaction but it was short of anything substantial. However, I wouldn't discount the ECB announcement or the real reaction to the Fed statement tomorrow. The market continues to trade in a W4 and after 3 days of correcting, the bears have failed to make any serious advances, so unless the market gaps down to test the TA tomorrow, the market is ready for a bull run.. and then it will test the TA. It's now officially 4 months since the correction started so I think it's game over for bears unless we see a bearish miracle that sends the market under the 50 day ma which is looking unlikely.

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