Tuesday, December 31, 2013

S&P500 29.6% 2013 Return

What a year! It seems like it was just yesterday that I was writing about the potential start of LT Int W3 when Joe Biden came up with a solution to the Fiscal Cliff last December 31st. The S&P 500 logged a 29.6% or almost 400 point gain for the year and exceeded even my own bullish count or any other that I saw at that time for that matter. Historically speaking, the year after such big gain tends to be one of consolidation so  I am not expecting another 30% year in 2014 (Another 30% run would put the SP500 at 2400). However, there is a clear possibility that the LT Int W3 is extending and should the LT Int W4 be a somewhat shallow correction, then that crazy 2400 level might become a reality. Also, let's not forget that from a purely technical perspective, we have a multi-year Right Angled Descending Broadening formation that targets 2484. A pattern which was put to the test just less than two weeks ago when QE Taper was announced and which just so happened to test 1850 late today as predicted on that day.

"I see a Right Angled Descending Broadening formation. Basically, it's an inverted Ascending Triangle and the target is 1850 should the market break the 1813 resistance."

It goes without saying that if we were to reach that level in a short period of time we will see a big correction as our GDP growth doesn't justify such huge run up in prices in such short amount of time. So my basic strategy will continue to long the market per trend indicators and hedge accordingly when I see completed structures. This method worked well for me this year, my problem was using the wrong longs as they were focused in China but I will switch the short term longs to the US. Last but not least, as we enter 2014, GDP growth is running at 4% and like I said last year as long as the economy continues to grow and we do not go into a recession, the path of least resistance is up.

I hope we find ourselves 30% Happier, Healthier and Wealthier next Dec 31st :) Happy New Year!

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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