This Correction

The correction I speculated about last week is now confirmed with today's initial sell off. The excuse as probably most people know by now is Cyprus, a nice little island nation in the Mediterranean Sea divided between Greeks and Turks (demographically that is). I happen to know a little about this Island and the main issue is the tax levy on bank account deposits. The fear is that it will set a precedent for other European nations and cause a bank run, financial panic, etc. But Cyprus is not Spain or Italy, it is a small country with an extremely lenient tax system that welcomes foreign companies and foreign money. Most of the deposits are assumed to be foreign and to have bypassed taxation at some point (similar to the Cayman Islands or the Bahamas for Americans), so when the mainland Europeans agreed to bail them out, they figured it would be ok to tax the accounts considering the money is not from there anyway. But obviously, they didn't see the backlash that they are getting at this point. So now they are debating thresholds for bank accounts to tax given all the worldwide commotion.

The bottom line is Cyprus served well as an excuse to correct and to me it's just that. On my post last week "Correction is coming", I posted:

So if the 1545-1548 level holds, then we can expect a nice W5 to reach the ideal target. Also, given the fact that W2 was substantial in its retracement, a W4 should not correct as much. So perhaps the correction will start as soon as manana por la manana.

Today's low was 1545 so nothing has changed from last week. The ideal would be for the market to triangulate or correct sideways but I can also see the possibility of an C wave that will test the 1538 support level. Additionally, this could be a "quick" W4 that has already bottomed out and is headed towards 1575 as there is a potential Inverted Head and Shoulders in the works. Whatever the case, the market has been able to digest some gains and it is setting itself up for another bullish run. If the market somehow loses the Trend Average and turns it south then I'll start entertaining bearish scenarios.

I sold my VXX position at the open, so I was able to squeeze couple of years worth of coffee :)  for now I am waiting for next key pivots to short or long. Also, still waiting for China and the HSI to finally bottom.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

Long Term Portfolio

• 100% Long in Red Chips traded in HSI (Mainland China stocks traded in Hong Kong) initiated September 2012. Only position trading 30-40% of portfolio for cost improvement. - Sold 10% on 12/27/12, Sold 10% 01/22/2013 - Bought back 5% 02/27/13 - bought 5% 03/01/13 - bought 5% 03/04/13 - bought 5% 03/06/13

Short Term Margin Trading Strategy 

•  Bought 1000 VXX@ 20.73 on 03/14/13 - Sold 1000 VXX@ 21.85 on 03/18/13 = +1.12
• Bought 1500 SPXU@ 30.98 on 02/27/13 - Sold 1500 SPXU @ 31.05 on 03/01/13 = +0.07
• Bought 2000 VXX @22.38 on 02/12/13 - Stopped out @22.38 on 02/14. Bought back @22.05 on 02/15/13 - Sold all 2800 VXX on 02/25/13 @ 24.30 = +2.05
• 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*