Monday, April 22, 2013

04/22/13: minimum tgt wave B reached, possible 1574 tomorrow?

There is a confluence of target areas indicating 1574 tomorrow end of day.

First of all, markets captured the 1560 zone which is the minimum to complete a normal wave B retrace.  It proceeded to advance to 1565 before taking a breather.

The next fib target is 1574 which is the 61.8% retracement of the entire wave A (I am currently labeling this as wave A of intermediate wave iv).  There are several intersection points here:

1.  1574 has been a strong horizontal resistance zone.
2.  IHS target is 1574 (neckline @ 1555 and head at 1536...1555-1536 = 19, 19+1555 = 1574)
3.  61.8% of 1597 to 1536 is 1574 as mentioned before
4.  The current wave B channel is pointing towards 1574, completing tomorrow 4/23.
5.  1574 is also the area of resistance of the downtrend line drawn from the broken neckline of the H&S @ 1597.

I am currently small short at the end of day to play a retrace to ~1556, but will cover and go long.

Note that in terms of the bigger picture, 50hourly is about to cross the 200hourly.  Secondly, there is a full moon on 4/25.

Wednesday, April 17, 2013

04/17/13: Wave B retrace to 1568-1574 into Friday then down into 1480-1490?

It looks more clear now that we have 5 waves down from 1597 and it ended at 1543.  This is a -54 point drop.  If this is the case, then we either finished wave A of int. 4 of we just finished wave 1 of a bigger, and scarier correction.

Covered shorts, went long at 1546.

I still think we are in intermediate wave 4.  Wave A completed and wave B commenced at 1543 and is on its way to make at least 3 waves up.

Wave B retrace varies obviously but for now I think Friday is a likely change in trend date so there is not much time for this wave to get going.  If we had 5 waves down, then we likely have a 5-3-5 arrangement.  This means that I expect the wave B retrace to fall somewhere between 1568 and 1574.  It may go higher but 1575 is going to be a huge hurdle to surpass.

If we get a double top at 1575, then wave C down is at minimum 1575-54 = 1521.  If 1.618 of wave A then we have 1486.63 as a possible wave C down target.  I doubt we get to see a 2.618 wave C...since this would indicate a price target of 1432, which violates what I am thinking long term...that this is wave 4 and we still have a wave 5 up.

Monday, April 15, 2013

4/15/13: tgt 1555 reached. Small long. wave A of int. wave 4?

Markets finished down over 2% on a very rocky day...a couple explosions went off during the Boston Marathon.  Overall not the most pleasant day.

The target of 1555 was reached today though it seems there is still some downside risk remaining to this leg.   My guess is we are in wave 1 of a larger wave A or currently finishing up wave A of int. 4.  Likely the former since I'm under the impression that this is the beginning of a much larger correction.

If we are in wave 1 of a larger wave A then:
If wave 1 was the leg from 1597.35 to 1579.97 then 2.618*w1 (for wave 3) gives a downside target of 1543.6.  1.618 was 1560.8 which already broke.  If we reach somewhere in 1545 area, then the wave 4 move up is likely somewhere in 1554-1561 range which is the back test of the broken uptrend rally from November.

After a bit more downside, my target is somewhere 1554-1561.

If we are in the process of wrapping up wave A of int. 4 then wave B ought to take us all the way back up to 1580s.  However I find this very unlikely unless we bounce hard tomorrow.

In either of these scenarios, I'm playing the bounce but will re-short after the next wave finishes because in either case here it's going to be a doozy.

Have a good one.

Wednesday, April 10, 2013

04/10/13: remain short SPX, all time high SPX, tgt 1555

Today was not good to say the least and I am not even bull/bear biased, just trading how I see it, right or wrong.

New all time high on the SPX.  Again, never thought it would happen back in 2009, never ever did.

Hourly OBV turned out to be right all along.  I almost discounted it since I remember a time last year when OBV made a new high but SPX never quite made it.  SPX proceeded to drop 8%.  That was one of the few times in recent memory at least.

I'm still holding short with an average of roughly 1565.  My target is 1555.  For tomorrow, I am just looking for 1580.  There is a confluence of support there so it would be a good spot to offload some of my recent shorts.

Despite the fact that SPX blew through levels I was looking at, I am just not entirely convinced we are going to continue to move up just yet even though I see SPX moving up to 1620-1650.  I'm not married to my count...however I'm not willing to give it up yet even though SPX is pushing at the max of what constitutes an irregular wave B or wave 1 of the next degree.

On the daily chart, we poked through both the upper BB and the kelt band.  At least a breather is due.

Tuesday, April 9, 2013

04/09/13: short SPX, ST target 1555. B wave possibly ended

Markets achieved another new high of 1573.89, +0.23 points versus the previous high set on April 2, and giving the bears yet the middle finger again.

I thought we would likely end short of the new high since I currently have this rally as the "B" wave of wave 4 of higher degree, but now we have inched slightly higher.  If we are currently still in wave 4 and this is the B wave, then we have ourselves an irregular B wave in an expanded flat structure.

It remains possible for this to be the irregular B wave.  Wave 2 in my book was the correction after the November election.  It was a simple zigzag pattern.  If we apply alternation, then I would expect wave 4 to be a more complex structure.  The expanded flat fits the bill.

Another reason why I am still convinced this is a B wave is the magnitude and speed of the rise.  B waves tend to move swift and reach overbought (or oversold) in a hurry (i.e. this one 2 days).  Time will ultimately tell but if this is an irregular B wave, then I am expecting the C wave to be fast and furious, down to 1480-1500 and exceed our A wave low of 1539.

One of my least favorite positions to take is a short-counter trend position.  Today was no exception.  It is always tough holding a short position through a fast B wave, but the payoff could be rewarding once the C wave is under way.

Even though I think we are looking at 1500 and lower, there is a web of support at 1555, so I will take it one step at a time.


CCIs are getting overbought with the 8 and 13 showing negative divergence.
DI+ is at the top of its channel.
Today's final hour slam is a +1 for bears but it will need some more effort tomorrow.
OBV is sky high.  I think the B wave has run out of juice so given how high OBV is, I am even more convinced that after this correction, we will see 1600+.  That is possibly a May-June event.

Saturday, April 6, 2013

04/06/13: long SPX again, revising ST target to 1563

Markets gapped down to 1540 after Friday's dismal report and rallied to recover most of the losses.

I was unfortunately long in the trading account and got stopped out at the bottom near 1539.  I ended up buying back my long position but at a higher price, booking a medium sized loss on the trade, almost wiping out the gains of the week.  Certainly, I have had some time to reflect on the dismal performance.  On the other hand, still finished the week in the black but it certainly could have been avoided.

In a hindsight, there were a couple flaws with this particular trade
1.  Stop was set very high.  I set the stop at 1540 but certainly looking back at the chart I should have been smarter and set a lower stop.  My rationale for having the high stop was I thought that there might be a cascade down to 1520 if 1540 failed.

2.  Blue dashed line was drawn too high.  I got lazy and never went back to double check on the bottom blue dashed line of the up channel.  When I first saw markets gap down, this exceeded the blue support line by about 5 points.  In hindsight this was 1) being too lazy to re-chart the support line and 2) stop was set too conservatively below the blue support line.

Now that is settled, it's time to look forward and see how the next week is shaping out to me.


I am back in as a long.  My general plan for this week is pop up Monday, down into EOD Monday, then a 5 wave move up to 1560-1573 area into Thursday.  This is a wide window because somewhere in here I have this pegged as the wave B top of wave 4 and don't want to get caught holding the bag.  Afterwards, a brutal wave C down to 1480-1500.

Giving me a bit more confidence is the shorter term CCIs have broken their downtrends while long term has not.  This tells me short term move up, long term down.

OBV is still holding firm.  It's support line remains intact.

The 50 hourly SMA is starting to turn down, while the 200 hourly SMA remains up.  Markets typically "reach" during these moments when the 50 crossing below the 200 (death cross) is imminent.  I think the reach comes this week as markets push higher to 1563...possibly exceeding this and heading to 1573 for a double top?

This would ideally fulfill a possible H&S top.  If this is the case, then we can ultimately reach 1480-1500 on the SPX towards the end of the month.

This week is marked with highly volatile external events notably North Korea.  It is unfortunate that the citizens of both North and South Korea will be forced into this.  In a wartime environment, it is the citizen that will pay the price.  The fib dates seem to like up with 4/10 or 4/11 which is the ultimatum set by North Korea...


Given Friday's performance, it seems more clear to me that we are currently in the early stages of the wave 4 correction.  The move down to 1539 is a wave A to me, and we are moving up to wave B.  Wave B can end quickly at 1560 on Monday which is 61.8% retrace or we exceed this to possibly move up to 1573.  I will have to rely on the CCI 8, 13, and 21 to give me guidance here on Monday.

I've seen others think we are already done with wave 4 which was the 1538 low a couple weeks back and that we're in some sort of wave 5.  I don't think so because that makes wave 4 way too small (only 1-2 days).  Meanwhile, wave 2 lasted 2-3 weeks.  It seems more likely that a wave 4 would last 2-3 weeks.  If we started at 1573 April 2nd, then this puts the end of wave 4 at the end of April.

Thursday, April 4, 2013

04/04/13: SPX long, target all time high 1576+

Sorry for the general lack of posts.  It has been a very busy couple of weeks...

Markets are going to move on the NFP report tomorrow.  That is apparent.  The question is a huge move up or a huge move down?

I look at charts and generally don't play off of macro models but look forward to these "big" events to see if there is the possibility of a large move up or down.

I have been buying and building a long position the past couple of days after closing the initial short.  I bought at rising wedge support but support broke pretty quick.  I then bought again near 1550 and again at 1552.  Currently slightly in the black so tomorrow will make this trade either profitable or bad.

The reason why I think there is upside tomorrow is:

1.  OBV level is implying we should be near the 1570 level and not 1560 (I know currently with the SPX we are just playing with only 5-10 points at a time).

2.  A/D is also near the 1573 level.  If A/D supported, I would expect the level to be much lower than where it is currently.

3.  CCIs aren't overbought.  Currently my thesis is we are in the process of moving up to complete a B wave.  Typically I have seen B waves top when CCI short term are very over bought but CCI medium/long term are not.  This setup isn't quite there yet so I'm betting that there is continued upside moving into the print.

On the daily chart, we closed above the 10 EMA and continue to rally off of 20 EMA support.

It is clear that this multi-month rally is close to being over but not until it goes out with a bang.

I just think that if SPX can tag 1570, momentum will carry it up to 1576+ to achieve the all time high.