Monday, March 17, 2014

Head and Shoulders Forming

The market tested the 1828-1834 level when pre-market opened on Sunday but then it reversed overnight and broke out of the wedge as I had been expecting last week. Obviously, this rally is just a bounce until it can recapture the Trend Average which is now down to 1864. 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. As it is there is already an H&S targeting 1790's but it would look even better if the market stopped at the shoulder's resistance levels, that plus it would allow me to get a better price on VXX :)

I sold my ST longs for a nice profit again (23/26) and I bought half my usual VXX position. Given the fact the ST trend is negative and the issue with Ukraine is far from clear, I'd expect the market to find it challenging getting past through resistance. With that said, if the west comes with light sanctions against Russia it might give the markets a reason to rally as the economic background in the US supports further upside. To me this is not about QE or taper anymore, it's about the fundamental economic picture of the US and the world for that matter.

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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