Perfect 5 Wave Count

The market continued its rally today breaking the 1434 level and turning the weekly channel to the upside. And most importantly signaling an impending trend change to the bullish side on the intermediate signal. I posted yesterday that 1441 was the projected target and we got very close to it today. But in looking at the waves closely, a better target was 1338 which is where we got the high today. I found 1438 by breaking down W3 in to 5 waves and you see a perfect count there. W1 on W3 was 14.41 points, W3 was 1.62 of W1 and W5 was 14.39 points! so close to perfection, it's scary. So the top today seems like the top of W3 and not the complete structure. If we assume the low today was the bottom of W4 then we have 1445 as the target. And obviously, the structure could have topped today but that 5 wave count on the 3rd is so perfect that I hope it stays intact.

I set my auto trigger today at 1441 to buy some VXX but it did not hit. But I'm not really sweating it since we might see a higher high anyway. I was also very tempted to take some profits on the FXI position but again, I think it's better to see an evidence of a short term top before doing anything. As it is, I could just let it ride until the short term trend turns bearish.

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