Diamond Bottom Targets 1385

The market broke out of the triangle today and in the process captured the TA. So this shows more clarity of where the market is headed next. I labeled the waves and unless the market proves me wrong, this is a W3 wave in process. Also, the pattern that was formed is a Diamond bottom which effectively now targets 1385. We would need confirmation on a rally with stronger volume to solidify this pattern so we'll see what kind of day we get tomorrow.

I went 200% long today at the close and I'm using the TA as my stop loss for half of the position. Also, I did some calculations and as long as the TA does not get closed under in the next 20 days. I see the market reaching 1400 this month, 1403 to be exact.

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Bullish Setup?

The market seems to be consolidating at this point as it keeps making higher lows. However, the close is still below the TA so the market could well be just taking a breather on further selling. But given the overall intermediate pattern of the Inverse H&S and the triangle breakout, I think we are going to resume the bullish wave as long as the market respects the higher lows and overcomes the TA. I already have long positions in place and will add as soon as the TA becomes positive again (right now is neutral-bearish).

Correction

The market broke out of the bearish trend today to test the TA and it closed lower after closing the gap from early morning. Technically speaking the market could be setting itself up for a big up day on Monday but given the overall short term negative trend it's a guess at best on which way the market will go next week. If the market keeps testing the TA and making higher lows then we can assume there will be a new high to come. For the bearish scenario to really gain momentum the market would need to break the weekly low of 1326.

I am holding my longs in the meantime. I think the government is having the cake and eating it too since it has the liberty to print money (there are willing lenders at low rates) to fend off any kind of slow down while making US made goods and services more attractive by depreciating the dollar. Technically, it's a win/win situation and markets should continue to rally in all asset classes.

Short Term Confirmed Bearish

The 4th wave I was looking for is out of the question at this point and not it seems like we are in the process of correcting the wave from 1294, which technically would be a W2 of a W3. A mechanical TA system would have told us to sell as soon as it broke yesterday but because I am trying to minimize "whipsaws" by using Elliott Wave and the MACD, I held on to my long position. I was wrong in assuming a final 5th wave that would have recaptured the TA. So now I have a trapped position that I might or might not sell depending on how we test the TA at this point. The short term is now confirmed bearish so we'll probably be in this correction for a while before going up again.

The commodities and FX sell off today is in my opinion just a correction from overbought levels. The long term trend remains firmly positive and I think we'll see some good opportunities in metals and oil once it's done correcting. I will post entries for Silver, Oil and Gold when their trends turn up. In the meantime, I'd stay away from trading them as they are highly volatile in a bearish wave that started on Monday.

End of Correction?

The market corrected a bit further today and closed under the TA, which is a short term bearish sign. But given the fact that there is bullish MACD cross and this correction was expected (look at the divergence), I lean towards a bullish wave coming as soon as tomorrow so I am holding my long position.

The dollar has made a new 3 year low but commodities sold off, so that is just a sign of a correction and it is opinion that commodities will keep going way up once this correction is over. There is no escaping the weak dollar as investors don't really have that many options to put money into. So maybe when the correction is over on that market, I'll post some entry points for Silver and Oil. I already have Gold from 1300's but I am not selling any of it. If anything, I am looking to exit all US dollar positions as soon as I get the chance with the exception of my S&P500 trades.

Correction target met

The market tested the TA and the lower rising channel trend and I think this particular correction is now over. If this count is correct then we will see new highs in a few days to finish what looks like the W1 of a bullish W3 that started at 1294. I went long today at 1350 and will be using the rising TA as my stop if it is breached at any point. I also will sit down and calculate a target for May, which gets a bit more complicated as there is a coming correction of the wave from 1294 once this final impulse is over. But for now, I'd say it looks like we're going to have a very bullish year as long as the market keeps above the trend averages.

Correction

I think we are finally seeing the start of a correction. However, what degree of a correction is the question. I favor a test of the TA, which is currently at 1344 and rising, before continuing upwards. I was ready to take losses (and gladly so given the events) today when I found about the Bin Laden news. But by the time the market opened, there was weakness so instead I just took some minor profit around 1360 and will be ready to go long when the next bullish wave resumes.

On a side note, it was about time this guy was eliminated. It seemed strange to me that we had spent about $1 trillion in wars that started because of Bin Landen and yet this guy was still around. So even if his killing does not end the war or Al Qaeda, at least there is some closure to 9/11. Just too bad it took 10 years to do this. Ironically, the guy lived in a mansion near the capital of Pakistan and not in some hole in a mountain as many had led us to believe.