Saturday, November 9, 2013

Counter Rally or Impulsive Wave?

The market rallied hard today and erased most losses suffered yesterday and it managed to close comfortably above the Trend Average again to maintain the Bullish trend. However, the lower low yesterday is significant and until the market can prove itself by making a higher high to neutralize yesterday's low, the burden is on the bullish side. The 1752-55 area is very important and I think it will provide confirmation on which way the market wants to go. If the market fails to make a new high but the correction holds at the 1752-55 level, then we will have a bullish pattern again. And obviously, should the market make a lower low then it will be confirming a continued sell off. I should also add that there is a bearish MACD cross on the daily so this favors a stronger correction coming sooner or later.

Looking at the longer term chart, the original targets I had earlier in the year have been technically satisfied (those target price labels have been there for months) so whether or not the 5th wave is over or we're just seeing the beginning of it, odds are a multi-month correction is coming according this count. With that said, if I break down the "stand alone W3" and pick what I see as W1 then the projection is 1810-15 and if I add W1 points (66) to the low yesterday we get 1812. So I am paying extra attention to the coming bearish wave and the 1752-55 level.

On my trades, I picked up VXX again yesterday and I am holding it along with my longs and until I see a firmer trend confirmation I will continue this hedge.

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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