Friday, January 31, 2014

Intermediate Trend is Confirmed Bearish

The market did not cooperate with the count I had posted yesterday and retraced almost all its gains from the previous session and with today's close we officially have an Intermediate Trend change to the bearish side. The last time we had an Int trend change was in August when the market had an 80 point correction and I think it is likely that we will see the 200 DMA tested on what is likely to be the LT Int W4 that I was originally looking for in November. How we get to that level remains to be seen but given the current environment, my guess is that it will be some form of Zig Zag as I really don't think the reasons for the correction are all that strong to begin with. The whole emerging market 'crisis" started with a misreading (yes a misreading as manufacturing continues to grow despite a below 50 reading) and now the thinking is if China slows down then it will drag the world down.. One thing that most media outlets fail to mention is that the Chinese economy has grown 600% in US dollar terms since 2000 and stands at $9 trillion+. If the Chinese economy did not slowdown its growth rate and adjust, the Chinese economy would be larger than the US and Western Europe or the G-7 put together by 2028. So the expectation for fast growth is outdated and economically naive for China, most people just don't know the numbers to begin with. Secondly, the whole PMI "contraction" situation is better explained here:

So as you can see, the sky is not exactly falling.. we just have people selling/taking profits.

I traded FXCM profitably (14/15) but got caught holding the bag with XIV, but I position traded it since support did not break and hopefully I'll get out of it early next week with a small loss or a small profit if lucky. Once I am out of XIV, I will stay on the sidelines or trade mostly short as the trend is flashing red.

Have a Great Weekend!

Short Term Trend = Bearish
Medium Term Trend = Bearish
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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