Friday, July 19, 2013

Potential Rounded Top

The market traded sideways today in what seems like a slow moving Wave 5 on the micro count. However, looking at the pre-market charts the count on the cash market was technically invalidated yesterday so we now have a small divergence in counts at the micro level. Therefore, the market could have topped at 1693 and the pattern looks like a potential rounded top. This particular pattern is not a very reliable one but we can be prepared in case the market continues to trade under the rounded line on the chart. Also one thing I wanted to point out was the W5 of LT Int W3 looks very similar in size and look to the current wave from 1560. The main difference is that wave was 151 points and this current wave is 133 points, so a rise to 1710 which just so happens to be 1.618 of 1626-1560=66 would make it nearly identical to that W5. I've seen these odd coincidences in the past so I wouldn't be surprised if that is what the market is looking for. An ideal top would come in the form of a very bullish gap to that target level and then a sudden reversal, which is what happened on the day the market topped at 1687 in May.

I bought VXX today using 50% of my short/hedge position. So if the market makes it to that 1710 level I will add the other half.

Have a great weekend!

Main S&P 500 Trends*

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

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

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