Monday, October 7, 2013

Market Update

The market lost the 50 dma again and I think the market is starting to price in potential risks from the ongoing Washington drama. Every single counter rally attempt since the Trend Average has turned red has stopped short of the TA and now that the market could lose the 50 dma, the odds for a more pronounced downturn increases. If the political situation does not improve and the government defaults on its obligations, we should see interest rates spike and most likely go into a recession. With that said, there are still some days left and I'd like to believe the Tea Party Republicans are able to see the huge damage that this causes to the country despite their good intentions. Also, on the charts I see a potential bearish count targeting 1650 based on the bearish wave today. If the market fails to make a lower low then an Inverse Head and Shoulders is in play targeting 1716. If the short term trend was bullish I would give the IHS a good chance but given the red TA and the current deadlock I think the market will continue to sell off or get stuck in this range until we get some clarity.

I didn't get a chance to trade today but I will go long for a short term trade if the market starts hesitating with a lower low tomorrow. A strong gap down would mean the market is on the way to 1650 where I will then pick up some shares.

Short Term Trend = Bearish
Medium Term Trend = Bullish Trend being challenged
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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