More Upside?

The market rallied as I had been expecting last week and I am looking at the TA as the spot to take profits or remain long. The test of the TA (currently at 1179) might come as soon as tomorrow or Wednesday and then a new bearish wave might take the market down to 1101. However, if the market can hold the TA then it will rally to 1200+ to test the 50 day MA. Fundamentally speaking, if a TARP like program is announced in Europe then it will serve as an great excuse to rally to the 50 day MA which is currently at 1210... and I hope they do since I am long on margin from the lows last week.

Retrace to TA

What couple of days! I am in Europe but I still get to see what's happening.. I went hedged when the TA broke and yesterday I went long at 1125 with the expectation that we retrace to the TA/Fib area, which I am guessing it will be around the 1170 area more or less. The sell off is somewhat panicky but the low for the year has not been tested yet, so maybe after a retracement we'll see a wave that will challenge 1101. But for now, I am long for the bounce and short at the test of the TA.

Correction tomorrow?

The correction I was expecting yesterday has not materialized but I am assuming it will come tomorrow. The bottom line is that the market turned bullish the minute it crossed the Trend Average and today's close just confirms the signal. The market should pullback to the TA and might test it successfully this time, if the market goes below it and doesn't recover then it means we're still stuck in a trading range and 1140 will be re-visited. Either way, I am starting to trade mechanically using the TA. As it stands, the system is up more than 15% since the end of July when I started posting real time trades and I changed the title of my blog to reflect what I am doing. Elliott Wave can serve a guide short term but it's secondary to all the other tools I've been using, so technically speaking the blog is no longer about EW.

Test of the Trend Average Expected

The market managed to reach the TA and shoot right through it and it has the potential to turn the trend confirmed bullish by testing it successfully and closing above. So tomorrow I expect the market to test the TA again and perhaps find support around the 1160's area and then set itself up to recapture the TA in a strong bullish wave. If for some reason the market fails to hold support, such as in the case of a very bad jobs report, then we go back down to 1140's and the battle of the bulls and bears will continue. The main issue is that there is lack of clarity in Europe and it will keep everyone guessing for as long as there is lack of concrete steps to solve their problems.

I am all cash and waiting to get back in long.

More Upside

The counter rally has been on the weaker side so far so upside might be limited. the TA sits at 1182 and the high today was 1176, so it looks like the bounce is going to be over soon. Also, the pattern the in market looks like an Descending Wedge so I will be looking at the trendlines for clues of future direction. Weak bounces usually lead to further downside so we'll see how the market looks at the end of this week.

Counter Rally Targets TA

The markets sold off as I was expecting last night and the market stopped short of triggering my stop loss, so at the end of the day it was a good profitable day. I think this wave is now done and remains to be seen if this new bullish wave will take us back to 1200 or just be a corrective wave, whatever it is, I am expecting it to test the TA which today sits at 1184 and probably will drop couple of points tomorrow. Once the market reaches the TA, the market will either stall and continue to sell off and possibly go for the 1101 low or will rally from there to 1200+ and maybe even the 50 day MA which is going to be tested sooner or later. So I'm looking at the TA as a level to hedge or add longs, there is a lot of uncertainty and the market has plenty of room for it to be oversold or overbought at this point.

Nested 1-2 or bearish set up?

I was way off on thinking the market would climb over 1200 again and instead it sold off, this just reinforces the idea of following the TA mechanically and give little weight to everything else during periods where extremes are absent. And as bearish as this wave was, it needs to break previous lows for another bigger bearish wave to resume. If a higher low is maintained, the odds will favor higher intermediate highs. Going by EW it looks like we are due for a bounce only to sell off again, so we'll see how the market bounces early next week. I will be patiently waiting for a good spot to go hedge, short, or go long..

Have a good weekend!

Market Reaction to Stimulus

The market used today's government announcements to go into a mild correction, one which I suspect is a W4 and which should be ending perhaps as soon as tomorrow Friday before going into rally mode again. The markets should find the positives in Obama's stimulus plan and Bernanke commitment to help the economy, technically it should be enough to get the market to at least 1210. What remains to be see is whether the market has enough fuel to challenge 1230 and then the 50 day MA. However, I should point out the bullish signal by the TA is non-confirmed as it closed under it so the market has to get back over it or else is going way down.

Target 1210 then 1230?

The market rallied as I expected when the previous correction started and now I am looking at how the market behaves around these levels. I mentioned it was very important how the market got to 1200 last week and so far it is looking like the market is aiming for 1230 and quite possibly the 50 day MA at 1248. With the VIX at 33, I can see the market going to 1250 in couple of days if we get a violent rally. With that said, the next level of resistance is 1210 which if it holds, will set the market for a Head and Shoulders formation that would target 1040 so it will be an interesting next few sessions. I am long and planning to hedge depending on how tomorrow develops. The TA was crossed today and the short term trend will be confirmed bullish should the TA level hold.

Now the Rally

Bears tried to break the 1136 level today but it did not happen and in turn the market managed a bullish reversal (even if it finished red). And in looking at candlesticks today's action looks like it could be a bottom. However, it needs to be confirmed with further upside in an impulsive manner. My guess is that the market is going for the TA in the next couple of sessions and how the news from Thursday get digested will probably set the tone for the rest of the month. At this point, I see no extremes so the market could start rallying hard from here or correct the bearish wave to the TA and then continue selling off. I will margin on the long side only at a bearish extreme (which I would prefer) or at the re-capture of the TA.

Correction Target Met

The correction I had been calling for since early this week has now met the target by retracing into Fib territory and meeting the Trend Average. And as I speculated yesterday the markets used the jobs number as an excuse, what remains to be seen now is how the market gets back up to the 1200 area. The reason for this is because of the impulsive nature of the selling today, a correction would have looked better if there were Zig Zags in them. If the market intends to rally to the 50 or 200 day MA, I'd like to see a strong rally starting early next week. I should point out that August 1101 level could be re-visited on a 5th leg of that intermediate wave as it seems like it is missing but odds don't favor that scenario at this point unless 1136 gets taken out (That would reverse the 1208 breach from Monday). I covered my short position and re-entered my long position (the trapped one) and I was able to bring down my cost average to right under the 200 day MA, so my next target is the 50 day MA. Also, I bought back what I sold at 1226 on my investment portfolio and should the market go into some sort of extreme sell off I will apply margin on the long side.

Have a good holiday weekend!

Test of the Trend Average approaching

The market started its correction today as I had been expecting and it remains to be seen what type of a correction this will be. I am assuming the market will test the TA at the very least and how it reacts there should give us an idea of what will come next. But given the fact that the intermediate trend is bullish now, anything short of a sell off will be just a correction and an opportunity to load up on longs. Tomorrow's job report will be a great excuse for more selling so we'll see if the Fib retracement area comes tomorrow. I am short and will start covering once the targets are met.

Correction

The market made a surprising (at least to me) new high and it was about to close in the negative until the last few minutes of trading where it was able to reverse what was going to be a bearish reversal day. Whether the market top for this wave is in at 1230 or make one more push before breaking out of the wedge, odds favor prices turning lower now. The overbought conditions and other indicators point to a top in place. Below are the daily McClellan Oscillatory and another indicator I like using which is the percentage of stocks over the 20 day MA, they are usually very reliable at extremes and they point to conditions ripe for a reversal. I sold my positions from 1180 and went short on my trapped long position at 1226 (I was previously hedged).

1370 High to be challenged

The market cleared the 1310 resistance and the 50 day moving average and it is obvious now that bulls are back in control. It's not clear to me if the correction for this wave will come tomorrow or early next week and it remains to be seen if the correction will be a W4 of the nested 1-2 I posted last week or a W2 of W3. Whatever it is, my game plan is to re-load longs on margin at the first TA test which I am assuming will be around the 1300 area (it will take couple of days for the TA to get there). I sold the rest of my margin longs at the 50 day ma and keeping my core long position.

Also, today I posted a chart of the overall picture. Note the divergences in the MACD and RSI and the low/highs for the markets in the last 6 months. It is clear that every pullback we've had have been corrections and the market looks like is headed for new highs in the next few weeks.

SP 1250 to be tested?

Market seems like it is nearing the end of the correction as support levels seem to be holding. Also, an indicator I like to use, the % of stocks below the 20 day MA indicates an extreme not seen since the last bottom in March so I think we at or close to the bottom. Obviously, I am not committing positions until the trend confirms the bottom but I am definitely on the look out for a turn around. I am assuming we are so close to 1250 that it will be tested, the 38% of the wave from 1040 is at 1245 so I think there will be at least a strong counter rally if these levels are tested. If the market does get there, I will go long there with the TA as target for profit taking.

A Rally is coming

The market continued its sell off today and it looks like it's about to be done with this particular leg as it is getting oversold at this point. So I am inclined to think we will see a strong rally starting early next week and we will see if the market can finally resume a bullish posture by turning the trend bullish again. The market is concerned about economic growth and that has been the selling excuse. But just like we hit a "soft patch" last summer and the Feds intervened, any more perceived weakness is certain to bring more Quantitive Easing and therefore more upside. I am staying put with my long positions.

Have a great weekend.

Bearish Reversal

This is the second bearish reversal in the last couple of weeks and the selling was pronounced and in heavy volume. However, the low from May 25th has not been breached and it must hold for the the intermediate bullish wave to continue. It the 1312 support is broken then the trend will officially turn back down. If that happens, after a new intermediate low is set, the market will re-visit the TA again at which point it will be a re-test or a real rally. The market does comfortably trade above the 200 day MA and despite all the news recently, the market has actually held up. So I expect a real rally to resume sooner rather than later.

Confirmed Bullish

The market is now confirmed bullish again by gapping up over the bearish trendline and closing comfortably over the TA. Commodities rallied as I was expecting and I see this as a new bullish intermediate leg for all asset classes (with the exception of the US dollar). So while the S&P target of 1403 was not reached due to the correction, chances are it will be reached in June IF the market respects the TA and trades above it. I assume these 5 waves will find a top tomorrow or Thurs and then retrace to the TA and then we should see wave that should take us to a new high for the year. And maybe then we will finally see a Fib retrace for the wave from 1040, an ideal summer correction.

I picked up emerging market plays today, mostly EWH (Hong Kong Index) and added to my FXI (China) position which gapped up a lot today.

Short term trend turning bullish

The market closed over the TA today and it is turning the short term trend bullish. However, we need confirmation in the next couple of sessions. Ideally, the market would break over the upper bearish channel. In the intermediate term picture, I see the market about to start a bullish leg as well so maybe this will be the start of a bullish wave that will last for few weeks. I was tempted to add longs (to my already long position) but I think I rather see the channel break before making the jump. Aside from US equities, gold, oil, silver, and emerging markets are all confirmed bullish and I will start positions next week in EEM, USO, FXI and some SLV. I have my gold positions from few months ago and I will probably cash in when the intermediate bullish wave is done.

I also have been working my my site and I will be launching it soon hopefully, the address is http://trendingwaves.com.. have a great weekend!

TA Tested and now..

The market tested the TA as I was expecting yesterday and now we shall see if this is a C wave, which implies a sell off in the next couple of sessions or a W3 that will break through the TA and turn the trend back to bullish. In looking at commodities and emerging markets, odds favor the start of another rally and if that happens the S&P will rally along with it. I am ready to add to longs should a break out occur.