Monday, December 31, 2012

Another Bullish Engulfing Pattern?

So we are going on the Fiscal Cliff after all but political maneuvering (with Biden's help) seems to have worked out a deal that will prevent taxes for going up for 99%+ of tax payers. And the market seems to have liked that a lot as we have a potential bullish reversal in place and a strong rally in the next few sessions. However, the assumption is that house Republicans will vote with their Senate leader so only after a deal is sealed will the air of uncertainty disappear. Should Republicans in the house revolt, then down the market will go. And as I was saying last week, these periods are impossible to predict with Technical Analysis IMO because we are not in a normal market, so only after we know that the risk of recession from the Fiscal Cliff is gone can we go back to normal again. But as it is, there is another Bullish Engulfing Pattern on the charts and you can see what happened the last time we had one. And should the markets rally, my guess is that it is going to rally hard to play catch up with the rest of the world. The economic environment is far more positive right now than it was last year where concerns about Europe collapsing, China hard landing and the US stuck in slow growth dominated the headlines. None of these major events came true and while they could still happen, the probabilities have been drastically reduced. Especially if we get the tax and cut issues worked out in the US.

I've never done this before but I am going to predict some levels for the S&P 500 and China/HSI for next year. Assuming none of the key economies goes into recession this is what I am projecting using valuations:

S&P 500 = 1,600
China SSEC = 3,000
Hang Seng Index = 28,000

So we'll see revisit these numbers Dec 31st next year and hope I will be somewhat right. I will post the long term Elliott Wave chart on the next update, which again I only look at for reference and not to actually trade or invest.

As of today, my main holding which is FXI shot up to 40.43 plus I got confirmation my refinance was funded at 3.5%, so I am a happy man :) And no new trades until the dust is settled but I will be deploying the cash in hand at the first sign of a healthy pullback.

Have a Happy New Year and may the next year bring lots of health and joy.. and some $$ too!

Main S&P 500 Trends

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

Long Term Portfolio
  • 90% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong) since September 2012. Only position trading 30-40% of portfolio for cost improvement. - Sold 10% on 12/27/12

Short Term Margin Trading Strategy 
  • Bought 30 AAPL @ $509.50 as of 12/14/2012 on margin - Closed @514.50 on 12/17/2012. = +5.00
  • Bought 1000 XIV @18.62 as of 12/13/2012 on margin - Closed @18.70 on 12/14/2012. = +0.08
  • Bought 1000 XIV @18.80 as of 12/05/2012 on margin - Closed @18.88 on 12/07/2012. = +0.08
  • Bought 1000 XIV @18.41 as of 12/04/2012 on margin - Closed @18.63 on 12/05/2012. = +0.22
  • Bought 500 VXX @29.23 on 12/03/2012 - Closed @30.12 on 12/03/2012. = +0.89
  • 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.
Net Profit since 11/08/2012 on open and closed short term positions = $2,625*
* Margin position is usually $15-20k
* Margin position in gold is $4k

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