Thursday, September 13, 2012

The trend is your friend :)

The Feds delivered the 5th wave and a much higher high as I predicted yesterday and now the market will be looking for a top. I initially posted my target range for Wave 5 last week at 1459-1500 and the market seems to be paying attention to my All those sideways trades above the TA have been W4's and with today's high of 1464, I see 5 Waves completed from 1396. However, as I mentioned from my post from last week, this 5th Wave could extend so the next clue will be on the test of the Trend Average which today is 1427. If the TA holds, EXPECT higher highs. Someone asked me a few weeks ago if I expected the market to reach 1423 and my answer was that as long as the market respects the Trend Average, I could guarantee 1423 would be taken out. And the same applies now, if the market can not change the Trend Average the market is headed to 1500 guaranteed! And yes there are many divergences, bearish calls by market "pros", etc. but as I have been saying since I started testing the TA more than 2 years ago, the trend is your friend.. and trading the trend beats anything and anybody as I've shown for the last 2 years.

Now on the Feds buying mortgages, I love it.. specially if it spills over the stock market. As an example, I'll use my own situation. If the long positions I hold double in price and the mortgage rates go even lower, then not only do I refinance my house and get a ridiculously low rate ahead of inflationary times. I'll go ahead and buy a second house as an investment. This stimulates the US economy and in turn the world economy. I can only assume the value of the dollar will go down and in turn lose its purchasing power due to inflation but as long as one is holding assets such as real estate, gold (which btw is forming a possible cup and handle and challenge its all time high), and STOCKS then we are good. The ones that won't necessarily gain in this scenario are people who don't understand the effects of inflation on purchasing power.. which is most of the population unfortunately. BUT the economy will be in a good shape and we'll have full employment again, so it'll be a wash for the general population.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX @8.98 as of 09/13

No comments:

Post a Comment