Today's Sell Off

 

The market followed through on its selling from yesterday and broke key support (50 DMA at 1812) so the bears are now in charge. I was expecting a correction but only after the 5 count was finished so I didn't think the sell off today was likely but it is what it is so we just have to position ourselves to profit from the coming waves.  There is the possibility the market is working on a Head and Shoulders formation and if that is the case we should see the market bottom close to 1768 and then bounce back to the Trend Average, so a good trade set up would be to wait for the market to get as close as possible to that level and then play the bounce. If the H&S pattern evolves perfectly then we're looking at 1680 as the downside target, which a bit below the 200 day moving average currently at 1701. Obviously, even if the market starts counter rallying on Monday it will have to overcome the Trend Average. Any failure to turn the trend back up will likely result in lower lows. Is hard to say if this is beginning of the LT Int W4 I have been looking for since November but so far it is looking like a good start so I will be ready for it. We have to keep in perspective as to why the markets are selling off and the reason so far is really a non issue IMO, as I said yesterday the main excuse was China's PMI but the Chinese market has actually been rallying not selling off. So once the correction is done we will see people remember why the market was rallying in the first place.

I ended buying XIV when the market hit 1800 and bounced but sold it for a small profit when the market failed to mount a meaningful rally. I will be buying XIV again if a neckline forms on the H&S and then hopefully VXX near the TA, I am currently 10/10 on these short term trades so it's a good start for the year. Now, I do have my ST long position invested in a China related ETF underwater so I will position trade that one until I come out of it in the green. Hopefully we'll see some more panic set in next week so we can have a clear pattern to trade.

Have a great weekend!

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.