Wednesday, December 11, 2013

Short term trend back to bearish

The market's true intentions were clear today as it sliced right through support without blinking despite "good" news about a budget compromise. The market has now been in an correction for the last couple of weeks but it still doesn't seem long enough to be the higher degree W4 my long term count is looking for, so my assumption is the market will continue to correct in time or in price. At the same time, this could be a "flat" correction of a lesser degree W4 so another W5 from here would not be all that surprising. Whatever the case, the market is correcting and working out the overbought condition from rallying almost all year and these moves are normal and expected. I am watching how 1779 holds but even if that were to break, there are several layers of support from the 1745 level (including the 50 DMA at 1758), which btw coincides with the still viable larger Head and Shoulder target. Lastly, today's move was so abrupt that it managed to reverse the short term trend back to red with just today's close. So now the ball is officially back in the bear court.

I sold my VXX position right at support (1780) and I will buy it back on the bounce or test of the Trend Average. Obviously, if the market puts in some sort of bullish engulfing pattern I will just stay with the longs I bought couple of days ago. Too bad that bullish wave made it 1 point higher than resistance on Tuesday as that is what prompted me to hedge, ideally I would have gone long today when I sold the VXX just as I did last week. You can't win them all.

Short Term Trend = Bearish
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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