Wednesday, December 18, 2013

Taper is good!

If there was any doubt speculative news are used as excuses to move the market, today's move should leave no doubt. Looking at that ridiculously bullish wave in the last couple of hours of today's session, one would think the Fed decided to announce a surprise QE5 as a Christmas gift. But then Bernanke announced what the financial mainstream media was most afraid of, the beginning of the end of QE3 and the market loved it. The market knew what it wanted to do since it started correcting 3 weeks ago but people needed an excuse to rationalize the correction. The real reason was the market running out of waves but normal people don't know that :)

And now that we got this bullish wave from the 50 DMA, 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. The odds of a bullish break out is about 60% so this pattern favors the bulls. However, there is also the possibility of a bearish reversal out of this pattern but the odds are about 20%. From the wave perspective, the bounce from the initial 50 DMA test are a mess so I'll try to label them once I get a better idea of what to label this new bullish wave. So far it looks too bullish to be a C wave so it might end up being a W1 or a Stand Alone W3(which implies a sideways correction before impulsing much higher). Also, the Trend Avg was reversed today to the bullish side given how high the market closed so it looks like Santa might be coming after all.

I ended up going long at support through XIV and was comfortably ahead at the time of the announcement. However, that initial reaction ran through my stop at break even so I made no money despite being right. Had it not done that, XIV would have paid for my fence and more by I did however make some Starbucks money using VXX on the short side and then I bought VXX again at the close and I'm now hedging my long position taken last week. So I am hoping for a test of the TA but not really counting on it at this point, so anything less than a strong sell off and I will be taking profit (hopefully).  If the market continues to run, it will mean the LT W3 is continuing and extensions are very hard to predict so I am going with the TA until I see another top..

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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