Monday, April 15, 2013

C or W3

The markets put in a C wave as I had been expecting, what I didn't see coming was the market losing the 1570 support and the Trend Average in one shot. But as impulsive as this bearish wave looks, it is still a C wave until 1539.50 gets broken. Until then, my assumption is this is a correction that will end in higher high to put in a bullish W3 to line up with a May high. Technically speaking, we could be seeing the start of a rising wedge for the final 5th Int wave but it's too early to tell at this point. The cause for the sell off was initially the "softer" data from China and then commodities panic sell off driven by Gold. Tomorrow we'll have to see how the market reacts to the terrorist incident in Boston. Terrible that we have to deal with this kind of crap so often.

As you guys probably know, I had a small position in gold last year but I sold that and exchanged them for FXI. I never really broke down the waves for gold but considering the price went from $800 just 2-3 years ago to $1900, it's not all that surprising of a correction. However, unlike a stock, there is no "PE" to gold as its value is primarily sentiment driven. So who knows where the bottom will be for that.. and on China, I find it interesting how 7.7% GDP growth is a "disappointing" number for an economy that size. To put that into perspective, 7.7% growth on an economy like China  creates an economy the size of Switzerland or Saudi Arabia every year andd an economy like Spain or Australia every 2 years. So being 100% long on China and enduring the correction is completely ok with me as I directly own businesses that make money in a continuously growing market priced at an historical low PE. If I had cash, I would buy more Chinese shares but I am maxed out at this point. I know someday I will look back and ask why this was not obvious to others.

For trades, I sold VXX again at the TA and improved my cost avg to $19.50. If the market goes below 1539.50, then I'll be forced to close the position and take the loss but I am assuming I will be buying back below what I sold today so looking for market upside to reload. Even if I took the loss, I would still be ok considering all the trades so I'll take whatever the market has. Lastly, I did not win the lottery so I guess it will have to be another time..

Main S&P 500 Trends

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

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