Pattern Break Out

Yesterday I posted the 3 rising valleys pattern (which is just a nested 1-2 in wave terms) and I figured  a fiscal cliff resolution hint would probably be needed to ignite a rally. However, I was wrong on that as we still have no clue on the Fiscal Cliff but the market decided to break out anyway. So there goes the 65% probability of a solution to the FC soon.. Looking at the wave structure, we have a nice bullish 5 count with W3 being 1.63 of W1. And if today's retrace was W4 then W5 projects 1441. So that looks like a safer place to load up on some shorts to hedge and perhaps we'll get that in the next couple of sessions. The intermediate trend will likely turn bullish in the next session or two as well, so it seems like we are headed way up.

I didn't trade today and I'm waiting for the 5th leg to load up on some VXX. And perhaps I will hedge/sell some of my China shares then too for some profit taking. I am guessing we need to see a bigger retrace and then a big run up in prices which would fit well with uncertainty over the FC and then a resolution.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Neutral Leaning Bullish (change of trend imminent if market remains above the TA)

Long Term Trend = Bullish

Long Term Portfolio

• 100% 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.

Short Term Margin Trading Strategy 

• 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 = $2,395*

* Margin position is usually $15-20k

* Margin position in gold is $4k