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.

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