Market Update

The market didn't do much today despite some of the not so good news coming from the Fiscal Cliff negotiations. But the market continued to consolidate in a W4, so my assumption is another bullish wave is coming to test the 50 DMA earlier next week. Also, I posted the long term count chart I've been tracking for a few months now. Again, I don't trade based on long term wave counts but it is good for "situational awareness" should the market breakout of the long term Broadening Formation. If the market can rally past the all time highs, chances are prices will take off. What catalysts could make this happen, is anyone's guess at this time. Lastly, I am posting the HSI chart as that is where I am 100% invested and where my trip to Easter Island depends :) I could have sold few weeks ago when the RSI was over 70 but seeing that it was a W3, I took my chances in not selling. And now prices are very close to a break out for a W5, so we'll see if this wave will top in the 22600+ area as projected should the W4 low hold. Money is flowing into HSI due to the rebound in China and the very high dividends being paid so it is a matter of time before mainlanders realize what they have in front of them. It makes no sense that condominiums in mainland China sell for $500,000 (which have tripled in the last few years) while collecting a 2-3% yield on rent, while "red chips" stocks are yielding 5-6%+ and are at a 15 year valuation low (10.9 PE). As it is HSI will continue to rally but if China starts to rally, then we'll see a long term bull market there.

Have a Great Weekend!

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012 - Closed @29..68 on 11/27/2012. = -1.09
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Year End Rally Set Up?

The market kept rallying as I expected yesterday and came within a few points of the 50 DMA and the previous peak from earlier this year (1423). So ideally, the wave will complete the impulse by testing these levels and then go on to a Fib retrace. Looking at the news, I think the environment is perfect for this to happen as the market is essentially trading on the Fiscal Cliff news.The ongoing negotiations and posturing by both the dems and the reps, will be a good excuse for a pullback to the Trend Average perhaps even the 200 DMA again. But a resolution to the Fiscal Cliff before Christmas will sure add fuel to the market to stage a big rally. The key levels to watch will be the 1385 low, the TA and the 200 DMA. I will probably attempt a short or buy back VXX at the 50 DMA and buy at the TA or 200 DMA with the 1385 as my stop. And obviously I'll have to see how the market gets to these levels for a better forecast. Had I been awake yesterday, I would have been up 4-5% already today.. oh well. At least HSI is 0.5% within this year's high so I am good there.

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012 - Closed @29..68 on 11/27/2012. = -1.09
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

200 DMA - Trend Average Test

Just when I had given up on the idea of seeing a test of the Trend Average and the 200 DMA, the market decided to break out of the rectangle pattern to test these levels, make a 38% retracement and then rally sharply towards resistance and slightly closing above it at the end of the day. And looking at the MACD cross on the chart, the market looks like it's headed to 1423 at this point. We could see some downside to retrace the bullish wave from today and in turn form an Inverted Head and Shoulder formation. The fact the market was able to reverse quickly after testing the 200 DMA shows there were buyers waiting for this test, like me actually, the difference is I was deep asleep when this happened and when I woke up the market was already higher than yesterday so I guess I'll just have to wait and set my alarm clock next time.

The overall picture continues to be bullish and a change of the intermediate trend to the bullish side gives a green light to go all long. This fiscal cliff issue will be resolved sooner rather than later and that should spark a huge rally, perhaps a Santa Rally?

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012 - Closed @29..68 on 11/27/2012. = -1.09
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Rectangle Consolidation Pattern

The market seems to be consolidating sideways in preparation for another bullish leg. When the market first topped on Friday, I was inclined to see a proper Fib retracement to test the trend average and perhaps the 200 DMA but so far it looks like another bullish wave needs to be in before a complete retrace. There seems to be a rectangle pattern in place and it seems close to completion so maybe we'll get a breakout in the next session or two. This pattern can fail (like any other obviously), so I'll be watching for key support at 1397 and resistance at 1409. I ended up closing my VXX position today out of frustration since it doesn't make sense to hold something that's out of synch with what I am tracking but perhaps I'll re-visit this trade should another bullish leg be put in.

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012 - Closed @29..68 on 11/27/2012. = -1.09
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Correction

The market started a correction today as expected but it's hard to tell what degree of a correction this is. I am going by the most simple assumption which is an ABC to the Fib retracement area of the Trend Average but I am also keeping an eye on a bearish W1-2 and hopefully we should be able to tell tomorrow.  Alternatively, if the market rallies to break the 1409 resistance then chances are there is one more leg up (perhaps to 1423?) but for now I'm assuming more downside.

I almost sold the VXX position I bought Friday as it just kept falling even when the market was down almost 1%. In the past, one could predict the direction of this ETF in conjunction with the overall market. But this correlation seems to have been lost recently and the only profitable trade in on the XIV apparently. Maybe this is indicative of an expectation of a "risk on" environment for next month?  whatever the case, I am stopping out if there is a rally tomorrow or at the end of the C wave. I rather stick to something that actually has a direct correlation with the market instead of playing market roulette. On the bright side, my longs on the HSI are about to make a high for the year and its daily MACD is doing a bullish cross so it's looking pretty good there. Also, Gold is looking like it's about to launch a big rally.

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

5 waves completed

The market seems to have completed 5 waves at this point and now I am expecting a pullback to the TA at some point next week for a W2 (likely) or B wave. This bullish wave creates the possibility that we are seeing the beginning of a 5 wave impulse but we will need to see confirmation by seeing the intermediate trend turn bullish as well. Also, notice how the market followed the lines I drew on Tuesday, the close was 100% on the dot.

HSI is rallying and there's a good chance it will be making a new high for the year :) I bought back VXX today (perhaps prematurely), so hope we get the pullback as expect early next week to make some Christmas gift money on them..

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @30.77 on 11/23/2012
• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Market Update

The market made a higher high today and the short term trend has turned bullish. The last time there was a change in trend was almost a month ago on 10/23 at 1445, so we'll see how long the market will trade above the trend average. Today's action could be counted as part of the W4, and perhaps the market will be ready to put in the 5th leg after the holidays. I was hoping for a zig zag to test the trend average but we'll just have to wait and see, the bottom line is we should see higher highs for this bullish wave before a substantial pullback.

I stopped out of VXX as a new high was made, so I am again out of the US market completely. And I'll jump back in should the 5th wave materialize or if the TA gets tested. Year end is coming so a big rally might be on the horizon if all the bearish trends are able to be reversed.

Happy Thanksgiving!

Main S&P 500 Trends 

Short Term Trend = Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @31.54 on 11/20/2012 - Stopped out @31.11 on 11/21/2012. = -0.43
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Cup and Handle Pattern?

The market finished its bullish W3 today and ideally the Trend Average (currently at 1374) would be tested before putting in another bullish leg to 1400+. There chart looks bullish no matter how you look at it short term and today's sideways movement fits well into a W4. If the market successfully tests the TA and rallies we will have a "mini" cup and handle pattern so I drew it on the chart to see if the market follows it. The short term trend is still neutral but will be confirmed bullish with another close above it, the next bullish test is the 50 DMA. Looking at the news, market calls are all over the place with Goldman Sachs (which I take seriously as opposed to the likes of Faber, Prechter, Roubini, etc) predicting a correction to under 1300 before the year is over while other respectable traders like Doug Kass are bullish with predictions of 1500+. Lots of smart people with lots of opinions.. whatever the case might be, the Trend Average will dictate what is actually going to happen so I will be trading accordingly.

I ended up selling the rest of my XIV shares at $18.26 for a pretty good gain and I bought VXX at $ 31.54 for the W4. However, if today's high is breached I stop out of VXX which is probably one of the most dangerous ETFs out there.

Main S&P 500 Trends 

Short Term Trend = Neutral Leaning Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Bought 500 VXX @31.54 on 11/20/2012
• Closed position 500 @ 18.26 on 11/20/2012. Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit = $2.05 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Bullish Outside Reversal

Today's rally confirms the bottom I speculated on last week and given the strength of the rally, the bearish waves that started in mid September looks like a double zig zag. The market was not only able to capture the Trend Average (1374) but closed over the 200 DMA as well (1382), so this looks like a bullish outside reversal (or bullish engulfing pattern) at this point. Obviously, the market must maintain these levels and ideally break through the 1400-1405 area. Going by the bullish flag pattern alone, the target is 1400-1405 and maybe history is repeating itself this year? last November the market bottomed and rallied around this time in a very similar form so we'll see the rest of the year will follow the same pattern.

I cashed out of half the XIV position and raised the stop of the rest to break even, so I made back my coffee money and some more :)


Main S&P 500 Trends 

Short Term Trend = Neutral Leaning Bullish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong).

Short Term Trading Strategy 

• Sold 500 @ 17.79, raised stop to break even on the other 500 as of 11/19/2012. Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 - Profit so far $1.85 on 500 shares
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Counter Rally

I was off on the bottom yesterday as a lower low was put in today at 1343 but right so far on a bounce materializing. The market got close to 1335 so it remains to be see if this level will be tested ultimately but for now the market should rally early next week to test the TA/200 DMA and try to re-capture it. I suppose this will all depend on what comes out of the Fiscal Cliff negotiations as a recession is almost assured should they fail to reach a deal and in turn a significant sell off in equities. But if they can maintain hope and perhaps seal a deal by Christmas, we will see a big year end rally. So as much I'd like to guess where the market is going, it is impossible to tell whether Obama and congress can find a middle ground to work so we'll just watch the key trends and see what the market does while things are up in the air.

I sold and bought back XIV today to position trade but made just an 4 cent improvement. But can't really complain since it's up quite a bit since yesterday. Hopefully we'll see the TA/200 DMA early next week..

Have a Great Weekend!

Main S&P 500 Trends 

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long (China and HSI Only) 

Short Term Trading Strategy 

• Bought 1000 XIV @15.98 as of 11/15/2012 on margin - position trade cost improvement 4 cents, so net cost $15.94 as of 11/16/2012 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Coming bounce

The market continued selling off today but was able to find support at the 1348 level and looking at the "micro" count there is the possibility of a bottom there. However, the market must rally in the next session or two to confirm. And now that the 200 DMA was lost it will serve as resistance so it remains to be seen what the market does when it reaches that level. If the market can not overcome 1380 then odds increase we will see lower lows so the rally that is coming (and it is coming sooner than later) will be critical to the bullish long term trend.

I couldn't resist buying back XIV after the SP500 triggered my "auto buy" indicator  (TA-2*VIX) so we'll see how that goes. Also, my longs in Asia have been affected by the US markets this time so hope a bottom has been found at least on an intermediate basis. But if not, the lower that market (China) goes the more I will continue to buy. With a yield close to 5%, I just can't refuse as it is ridiculously cheap IMO.

Main S&P 500 Trends 

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long (China and HSI Only) 

Short Term Trading Strategy 

• Bought 1000 XIV @15.98 as of 11/15/2012 on margin 
• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Losing the 200 DMA

I posted yesterday that the market had to re-capture the 200 DMA in order to start any meaningful bounce and for a minute I thought it was going to happen as futures were up 10 points in pre-market. However, the cash market had its own plan and broke through the potential triple bottom level and ended up the day at an 5 month low. So at this point, I am leaning towards seeing 1.612 of A or W1 or 1335 level and then we'll see where the long term trend is at that point. I continue to think the current panic is just part of a correction but I am not going to find the trend so I am staying out of the market until 1335 hits (if it does). I bought back XIV today (16.88) and had a 5 point stop so I stopped out at 1365 (16.66) so we'll see at what price XIV will be at 1335? This has been so far a persistent decline without any meaning counter rallies so I think if we get deeply oversold, we will get a huge rally/counter rally.

Main S&P 500 Trends 

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long (China and HSI Only)

Short Term Trading Strategy 

• Bought 1000 XIV @16.88 as of 11/14/2012 on margin - Stopped out @ 16.66 on 11/14/2012. = -0.22
• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012 = +0.58
• Margin positions in Gold initiated 11/06/2012.

Market must re-capture 200 DMA or else

The market gapped down today and re-captured the 200 DMA as I was speculating yesterday. However, there wasn't much conviction in the rebound and the close was well below the 200 DMA which adds to the bearish trend. However, there is one last bullish set up and it is a possible Triple Bottom Reversal on the 10 minute time frame. This would call for the market to test the low today, hold and rally strongly from there. So  I am hoping we'll see it tested tomorrow so I can buy back the XIV I sold, I would be buying at the test and set the stop at 5 points below today's low. The market is bound to rally or counter rally sooner rather than later so this set up provides a good reward/risk. If the level does not hold then more downside to come but the longer the market takes to make bearish advances, the stronger the rally will be. As it is the market is oversold but couple of strong down legs would make it really attractive and perhaps it will force politicians to come together for a solution to the Fiscal Cliff. If that is resolved (which I think it will be before Dec 15th), we will see a big rally.

Main S&P 500 Trends 

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio

• 100% Long (China and HSI Only)

Short Term Trading Strategy 

• Bought 1000 XIV @15.67 as of 11/08/2012 on margin - sold 1000 XIV @ 16.25 on 11/12/2012. 
• Margin positions in gold initiated 11/06/2012.

Getting close?

The market has not bounced as swiftly as I had been wishing so the counter rally so far leaves an opening for
another wave down. Ideally, that wave would be a capitulation wave so we just have to wait and see. I still believe
we are at or close to a bottom on an intermediate basis so we'll see if the 200 DMA can hold even in an sell off (a day that gaps down and reverses back to the 200 DMA). Also, the the VIX has been dropping while the market has not made any significant advances and that signals traders are betting the bottom is near. Obviously, they could be all wrong but I am starting to think the market is just buying time and setting itself up for a year end rally.

I ended up selling my XIV position given my feeling that we might have one more leg down and luckily this thing went up 6% today. So I am back to 100% emerging markets, $0 in the US markets for now.

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Long Term Portfolio: 100% Long (China and HSI Only)
Short Term Trading Strategy: Bought 1000 XIV @15.67 as of 11/08/2012 on margin, sold 1000 XIV @ 16.25 on 11/12/2012. Margin positions in gold initiated 11/06/2012.

Market Update

The market found a bottom today as expected and initiated a bounce. What remains to be seen is if the 1373 level is a bottom that will hold for a while or just a stop on the market's way down. As it is the market's bottom today was just 2 points shy of a 50% retracement of the wave that started at 1268 in the summer, pure coincidence or will the market find its footing to rally until the end of the year? if anyone knew the answer, they'll be richer than Buffet :) The bounce has 2 waves so far an W1-2 or A-B so ideally we would see a leg that is equal to A/W1 early next week to the Fib retracement area/Trend Average. If the market manages a rally that approximates 1.6 of A/W1 then odds will favor the leg being part of a 5 wave count. Whatever the bigger picture is, I think a bottom is in or close to being in before a strong counter rally. The issue (or excuse) at hand is the Fiscal Cliff but I personally think it will get resolved in Obama's favor sooner or later. If Obama has his way then taxes go up for only the $250k+ income households, if Reps refuse to make a deal on the ground of refusing higher taxes then higher taxes automatically kick in anyway on Jan 1st for everyone and they will be blamed for a likely recession and eventually lose congress in 2 years. This is why Boehner came out just a few hours after the election to offer to work with the President, he knows they're bargaining from a weak position.

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish

Have a Great Weekend!

Long Term Portfolio: 100% Long (China and HSI Only)
Short Term Trading Strategy: Bought 1000 XIV @15.67 as of 11/08/2012 on margin. Margin positions in gold initiated 11/06/2012.

Last but not least, I dedicate the video below to those people who don't like my calls whenever the picture doesn't favor their short or long positions.. lol. It's of Karl Rove, a very smart man having a denial meltdown on live tv on news Obama won. Sometimes smart people fail to see things for what they are.. and perhaps this phenomenon (people in the media and on the Rommey camp who where "shocked" by results because they were selective on data they believed in) will be studied for years to come.

Correction over?

The market seems to have completed the 5 wave count I posted yesterday and at the same time testing the 200 DMA as I predicted yesterday. And now the market is at a critical junction where it must rally from here to confirm that selling for the past few weeks has been a correction. If the market does not bottom at this level and goes into sub 1350 (specifically 1335), then the long term trend will likely change and a new bear market will begin. As of now I am seeing a double Zig Zag from the 1474 complete so I am placing a bet now as I have been planning since I first announced the short term bearish trend on 10/23 and the intermediate bearish trend on 10/25. I bought back my XIV position at the 200 DMA and I am hoping we will see a rally in the next session or two back to the Trend Average. Gold continues to rally and that supports the idea of a correction, also emerging markets seems to be on W4 so I am thinking all markets will rise in unison.. we'll see.


Long Term Portfolio: 100% Long (China and HSI Only)
Short Term Trading Strategy: Bought 1000 XIV @15.67 as of 11/08/2012 on margin. Margin positions in gold initiated 11/06/2012.

Going for the 200 DMA?

The elections results are in and the market used it as an excuse to sell off. And in retrospect, the Head and Shoulders I posted about couple of days ago was not invalidated as I thought yesterday as the initial 1434 level was never breached. So technically speaking now that I think of it, the target remains the same and I lean towards seeing the 200 DMA before a bounce. Another way of looking at it is counting waves, as H&S formations are basically W1-2s and if you look at the chart you can see where the count is. At one point yesterday I thought we were going to see a break of 1434 as the market was down but not enough to make a lower low and then rallied back after Obama's re-election was announced. But the pattern broke the other way, as it happens sometimes.

I have $0 invested in the US so I am still waiting for an opportunity when the 200 DMA materializes. However, a break of the 200 DMA would be bad for the bulls so that level must hold. Gold actually rose today and I am sticking with emerging market stocks. I think re-electing Obama confirms Bernanke will stay as well as his fiscal policies. So you can bet the Feds will be ready act aggressively should the market fall more than what they'd like (which it's 20% if I remember correctly).

Long Term Portfolio: 100% Long (China and HSI Markets Only). Margin positions in GOLD initiated 11/06.
Short Term Trading Strategy: $0 in the US. Sold XIV position from 10/25 at $16.10 (there goes my coffee!) - Bought XIV @17.64 as of 10/19. Buying XIV back at the 200 DMA.

1434 being challenged

The market managed to rally all the way back to the 50 day ma again today and in the process invalidating the potential bearish head and shoulders I posted about yesterday. And should the market put in a higher low then we will have a bullish pattern as and Ascending Triangle targeting 1460 or a bullish nested 1-2 (if you believe Ascending Triangles are only continuation patterns). So we'll see how the market reacts to the winner tonight..

I bought Gold today and will wait and see on US equities.

Long Term Portfolio: 100% Long (China and HSI Markets Only)
Short Term Trading Strategy: Sold XIV position from 10/25 at $16.10 (there goes my coffee!) - Bought XIV @17.64 as of 10/19.

Market Update

The market seems to be in a wait and see mode (for the elections I suppose) but in the meantime it is forming a potential Head & Shoulders with an 1382 target, so just couple of points above the 200 day ma and perhaps only after we see this test will the market launch a stronger counter rally to challenge the 50 day ma again. However, the close today was just above the Trend Average and the 1405 level has held. Additionally, the MACD is doing a bullish cross so the potential for a rally starting tomorrow is also a probability to consider. I am on the sidelines on the US market so just waiting for a good entry point but I will probably start buying gold tomorrow as we should start seeing a rally there soon.

Long Term Portfolio: 100% Long (China and HSI Markets Only)
Short Term Trading Strategy: Sold XIV position from 10/25 at $16.10 (there goes my coffee!) - Bought XIV @17.64 as of 10/19.

1405 or 1434 next week?

The market tested the 50 day ma as I predicted yesterday and the selling started once that point was reached. What remains to be seen now is whether the market is going for the 200 day ma by breaking 1405 support or if the market intends to rally back up to 1434 to close above it. As I said yesterday, I lean towards the market turning bullish but it does seem like there is a missing down leg so perhaps the market will retrace to the 1420 area before breaking through 1405? pure speculation obviously but now that the parameters are set, I can buy some stuff next week. I'm probably going to buy VXX is we get that retrace to the 1420s area with a stop at 1434. Or I'll be a buyer of XIV at the 200 day ma. China and HK continue to rally so we'll see if that gets affected at all next week, I will be ready to start taking profit there fairly soon but leaving most of it intact for my Easter Island trip :) (That Shanghai index is going for 10,000 before the decade is over). Also, gold is finally in the Fib retrace area and I will be picking up some at the first change of trend as I am betting on the cup and handle pattern there.


Long Term Portfolio: 100% Long (Emerging Markets Only)
Short Term Trading Strategy: Sold XIV position from 10/19 at $16.10 (there goes my coffee!) - Bought XIV @17.64 as of 10/19.

Have a Great Weekend!

Btw, here is an article by EWI about moving averages (they are the LAST ones to actually follow MAs but maybe it has educational/entertainment value)..

Moving Averages and the Wave Principle

Improve your Elliott wave pattern identification skills with this lesson from Jeffrey Kennedy
Elliott Wave International

50 Day MA challenge coming up

I posted yesterday the potential head and shoulder's formation targeting 1430+ and today's price action confirms that is where the market is headed. To be more specific, I think the market is going to mount a challenge to the 50 day ma at 1434 and that is where resistance will hit. If the market can overcome the 50 DMA then the market will be able to turn bullish again short term. And my gut feeling is that the market is going to turn bullish again primarily because of how Europe and Asia are trading, so we'll see if that theory proves correct. I missed buying XIV yesterday (it went up almost 10% today) but I'm enjoying my HK/China longs.