Wednesday, March 19, 2014

Close under the Trend Average

I think the market has enough momentum to hit the ideal right shoulder of 1867-74 of the Head and Shoulders I speculated about last week. 

And the market hit the exact top of that range by putting the high today at 1874 before selling off to 1850 and then bouncing back to test the Trend Average but closing back under the TA. I was looking for a 5 wave count on micro waves but I only saw 3 waves to 1850, so I am assuming the bounce is an X wave and the sell off will continue after that is done. Once the market is firmly under the TA, I'll be looking at key support levels to take profits but as it stands it looks likely that 1839 will be tested and as I said yesterday if the H&S completes we are looking at 1793 as a target. The bullish scenario I am keeping in mind but not really considering until the market trades back above the TA is the Inverse Head and Shoulders formed today that targets 1909. A break of 1839 invalidates that pattern. So far the H&S speculation from last week has been on the $$ so hope that continues..

The fundamental excuse for the sell off was the speech by Yellen which I mentioned yesterday (I get the feeling the market was going to sell off regardless thus my title post "now the sell off" last night). The announcement that rates might rise sooner than expected is a negative for equities and this might continue to be the excuse to sell in the next few days. Also, as I have been saying, it is clear to me now the Feds believe the economy is strong enough to be on its own. So the bull market we have had will now depend on the economic performance of the economy (as it should be!)  and not liquidity. Good economic numbers will support further rallies, bad numbers will cause corrections. The days where bad news was still good news are probably gone.

I am holding on to my VXX position until I see a g$$d reason to sell :)

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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