Wednesday, May 15, 2013

Correction and Levels to Watch

The market corrected and rallied following the count I posted yesterday and now there is a good chance of a not only a correction but a top. But as I said yesterday, should the market put in another W4 then the last 5th wave just extends but I think this is the topping area more or less. The Cup and Handle target was met today and the market is now at the upper end of the revised target range ( I should add that 1685 is 1.618 of Int W1 so an extension is very possible). I am looking at couple of levels for support and they are 1636 and the 1623-26 area. Which level ends up holding will probably give us clues as to how this correction will evolve. The less severe the initial correction, the higher the chances of a zig zag or double zig zag. But if we get one big sell off to the 1585-1597 area then I will favor a triangle. Also, I expect the Int W4 correction to take some time to work off the overbought conditions (and make no mistake the market is very overbought at this point). The Trend Average will give us confirmation but as in most W4s, I expect the TA to get whipsawed by the nature of W4 corrections.

Today I worked on some calculations for the ultimate target for the potential long term 5 wave impulse from the 1074.77 low in late 2011 and I am getting 1942 by the time all waves are in around the end of 2014/early 2015. Also, the ideal bottom for the coming LT Int W4  is 1581 with the top of the entire 5 wave LT Int structure from 1266.74 at 1791 to be completed most likely in early 2014. These calculations are based on my own formulas that I have been tweaking now for a few months. The targets I have mentioned in the past few months are based on this same formula. So as far fetched as these targets might sound, that is what I am getting. Then again, who would have thought the 1642-1668 target I announced in April for the end of the 5th impulse by this month was even possible when the market was having a hard time clearing 1560's in April?? This has been a huge rally that has steamrolled bears, specially those who traded on fundamentals.

Today I executed my VXX plan and bought the other half at $18.31. And btw, I will assume I am wrong as I always do when I take positions against the TA until the TA turns red. So should bullish patterns evolve I will be trading in and out of the position for cost improvement just as I have in the past couple of weeks. The main indicator on this blog is the Trend Average, waves and all the other stuff comes second so if you are shorting respect the bullish trend!

Main S&P 500 Trends

Short Term Trend = Bullish
Medium Term Trend = Bullish
Long Term Trend = Bullish 

No comments:

Post a Comment