Bearish Engulfing Pattern

I mentioned there was a potential top on yesterday's post and today's sell off seems to confirm this. The market came close to 1534 target but there just weren't enough buyers. We have a Bearish Engulfing Pattern or an Outside Reversal Pattern in addition to the 1514 level getting breached, so probabilities are very high that we will see 1498 tested before we see 1530 again. But just like the last time we had an BEP, if the market can reverse the losses on an equally strong bullish day then the bullish trend will continue. But for now, I think it's safe to start projecting downside. We just need Trend Average confirmation which is at 1519 at this point, I am assuming there will be a bounce that will test it in the next session or two but I am betting the downtrend will continue. For now I am watching the obvious support levels which are 1498 and the 50 day moving average at 1471 and going up a few points a day. I don't know if the correction will be a W4 or a W2 so it will all depend on how the correction ends up looking and what levels get tested. But the bottom line is this is a correction and the market should continue rally to higher highs.

VIX shot up 20% today and VXX went up almost $2, so that position is looking better now. FXI breached $39 momentarily and I will be more than happy to get it in the low 38's. Finally Gold is really selling off, I thought it had reached a bottom but key levels broke. So I will be looking to get out of that position on the rebound. It's not a big position but nonetheless money is simply moving from safe haven type of assets to equity so I rather use that money on stocks.

Main S&P 500 Trends

Short Term Trend = Neutral Leaning Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish

Long Term Portfolio

• 60% 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, Sold 10% 01/22/2013

Short Term Margin Trading Strategy 

• Bought 2000 VXX @22.38 on 02/12/13 - Stopped out @22.38 on 02/14. Bought back @22.05 on 02/15/13
• Bought 800 VXX @23.70 and 1700 SPXU@ 31.68
• Bought 1000 VXX @ $25.78 as of 01/16/2013, Bought 1000 VXX @23.68 on 01/22/2013 - Sold @22.70 to position trade on 01/25/2013. Took loss $2.00
• Bought 1000 VXX @ $25.92 as of 01/15/2013 - Closed @25.96 on 01/15/2013 . = +0.04
• 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

* Position in gold is $4k