Bullish Summer?

The market ended the month at a 3 year high and everything is bullish right now. I happen to own Gold and Chinese currency and that has been doing extremely well as well. So from the technical perspective, I think we should assume a continued rally possibly into the summer before any significant correction. From an EW view, there are several ways to count this wave in the intermediate term but from the short term perspective this can't go on much longer without at least some sort of drop. Indicators are all overbought, so it favors a pullback Monday. Also, there hasn't been a single rally where there were more than 4 white candle days in the last 8 months so that also favors a pullback Monday as well. I drew a channel on the chart where the market could find support in the event of a pullback and I will be going all long at that level. As of today, I sold the hedging position from yesterday at 1363 and I am net short.

And btw, the market almost reached the 1370 target I had for April. So I just have to extrapolate some of the data to get to a May target and I will post that Monday. Have a great weekend!

Q3 coming and so is another big rally

I think the last time I saw a wave like this was the break out wave from 1040 back in early September 2010. The market is showing a lot of strength and all assets are going up across the board. And I think the message is clear, people are going to move away from holding cash (In US dollars) and try to hedge against the dollar's depreciation by going into commodities, precious metals and equities. And in the not too distant future, everything we import (and items that are priced internationally such as corn) will see a big increase. So the plan is to go long in the first pullback on foreign equities, oil and some commodities on the rest of my portfolio that is sitting in cash.

I went hedged today as the count has become unclear at this point. The E-minis have a better count but the cash market looks like a rocket so I am not going to make predictions based on waves until I see something clear. The daily RSI is at 70 and many indicators are overbought which favors a pullback. But overbought can get even more overbought, so I'll just wait it out.

Break Out

The market is definitely breaking out of the triangle at this point and it seems to me like we're in for a bullish year regardless of oil, possible recession or whatever as this is a rally being fueled by the Feds. I was expecting a pullback today but almost every pullback recently has been around 5 points so it's tough shorting this wave. I am still holding my shorts as I think we will correct to the TA eventually but it is going up fast so this correction better come soon. Everything is bullish now I am just waiting for the correction to get back in long.

As far as the wave count, the entire wave from 1294 could be considered a W1 of a larger degree and it is running out of waves at this point if we were use basic EW counting guidelines. The next resistance is 1261 so let's see if it makes it there. It seems like the 1370 target I had posted on the 1st of the month is within range.

Break out or is this it?

The market traded higher as I expected on my post yesterday and it'll be interesting to see if what we saw today was the beginning of a break out or the top for this wave. I expected resistance to be tested and today we did but the high makes me suspicious. If this was a stock, I would assume it is breaking out. But since we're dealing with an index, I favor a correction starting tomorrow or the day after to test the TA/rising trendline and then go into a W3 that will blast past resistance. There is a bearish MACD cross and the Stochastics also favor a pullback. I shorted at resistance (1345) today and I am hoping to cover at the retrace of this wave, ideally in the 1325 area. And unless the market falls off a cliff there, I will be going long there to ride the coming bullish wave.

Ascending Triangle

The market didn't really do much today and it seemed like a Wave 4 in progress. So the 5 wave count I had on Friday could probably be a 5 waves within a 3 Wave and we're consolidating here for another bigger push. Also, the market is staying inside the potential Ascending Triangle I posted last week and it could break out from this pattern on the next push. I still favor a push to test resistance or make a marginal new high and then go into a correction to test the TA and/or the rising trendline on the Ascending Triangle before breaking out. I closed my short position today at a minor profit and waiting to see another bullish wave to short or the correction to go long.

On a side note, I twitted an article on China pursuing diversification of their holdings into Gold and Oil and that supports the view of much higher prices in the longer term. The thinking is the dollar will continue to lose purchasing power and countries around the world will follow in parking their money in commodities and precious metals. Which in turn, will drive prices not only to new highs but maybe even create a bubble in this asset class. Gold has gone up 10% since I posted the buy signal in February on the blog and I will add Oil and silver entry points on the next pullback. In the future, I will cover these trades as it seems like we're about to see a major bullish wave on them.

Next bearish wave - Short term trend confirmed bullish

The market continued its way up today and it came very close to the high for the year in afterhours. However, the cash index did not produce the same levels and it seems to me like the wave has topped or will top on Monday morning as I see 5 clear waves from the 1294 bottom. This close turns the short term trend bullish so the next bearish wave should show where the market is headed next. If the market retraces to a Fib level in an non impulsive manner and closes above the TA, then it will be time to go long as the market will be in for another bullish wave. The only thing that could change the bullish scenario at this point is a major sell off on Monday that shows this last leg was just a C leg of an expanded flat. But given the fact oil, commodities, precious metals, etc. are rallying, it seems to me like this is a rally tied to the weakening dollar and thus the main driver for higher prices is the perception that the US dollar will continue to depreciate.

I went short today at the end of what I see as 5 waves and other TA factors. I figure this is a lower risk/high reward situation at this point. And if we just get a correction, then I will be all in long. I have most of my portfolio in Chinese equities, Chinese currency and Gold and that's about 50% of my holdings. And the other 50% is in dollars (cash), which I intend to switch away from since we will see the dollar at an all time low fairly soon.

Have a great weekend!

Potential change of trend

I was expecting a gap up today but nothing like we saw this morning. All the near resistance levels were broken and so was the TA so this could well signal a change of trend if the market does not reverse hard in the next couple of sessions. The wave we saw today was a W3 of some kind and the closing being a W4. So I expect a W5 after hours or tomorrow and then a sell off or correction. I think how the market behaves at the TA/support will give us a clue of what we are in for.

Today I posted two charts. The first one is an Ichimoku chart and it signals a bullish turn in both clouds and candles. Also, we now have two very bullish technical patterns. We have the Inverse Head and Shoulders in place targeting 1500 and the potential Ascending triangle targeting the same range as well. So if the next bearish wave turns out to be just a correction, then we're on to a massive bullish wave on a break out of this triangle. The second chart is the EW chart and I still have the bearish option up because the short term trend is not confirmed bullish. So I am labeling the only bearish way possible which is an expanded flat. If this is the case, then we enter into a major sell off in the next session or two simple as that. I plan to short this wave at resistance which should come in at 1339 or 1344 and I expect the wave to test the TA or come close to it at the very least, which is currently at 1318.

Shorting in a bullish trending market is very risky. So if you're a short, make sure you are not holding against the trend.