Q's & SP-500

If the 5th wave in the Q's chooses to run to .382(1+3) and 1.00*1 up at 93.75 that would be a 3.5% rise from today. If the SP-500 traded in tandem @ 1:1, so a rise of 3.5%, it would put the SP-500 at 1914.75, which is very close to 1920 I've been looking for.

It's a New Week

The updates to the blog are right below the headline (right above this post) and to the right of this post. It is the current market call, which today is still long. These two areas show my current holding status.

These won't change daily, they are meant to keep us on the correct side of the trend, and right now the trend is still up.

QQQ - Tracking the High

I'm looking for the completion of the five wave sequence higher in QQQ. Here is the current updated chart that shows we are in the 5th wave higher. It also shows the FRZ (Fibonacci Resistance Zones) of wave 5 versus the previous subwaves. I can't remember having a scenario like this where nearly all the fib's of the 1st wave and waves 1-3 line up at nearly every level. The only fib resistance level where they are not in sync is where wave 5 would equal .50 (1+3).

All of these fib confluences are valid for reversal zones, which makes shorting this move even harder than usual.

The Chart:

We are currently at wave 5 = .618*1 and wave 5 = .236 (1+3), which isn't a very common Fib Confluence for the market to stop at. The more common occurrences happen when wave 5 is either equal to wave 1 or wave 5 = 1.618*1. The common fib for wave 5 vs. waves 1+3 is .382.

We can see from the chart that the next FRZ is the 93.85 level and that is precisely where wave 5 = wave 1 and wave 5 = .382 (1+3). I would expect a ton of resistance at this level and will most likely enter the first long-term scale short there.

Where we came from:

I have wave 1 of this move kicking off from 66.88 going up to 74.95 = 8.07 pts.

Wave 2 - 74.95 to 69.15 - 5.8 pts retracing wave 1 71.8% which is a little deep for a second wave

Wave 3 - 69.15 to 87.90 - 18.75 pts extending wave 1 232% which is typical of 3rd waves. We want to see the 3rd wave extend anywhere from 161.8% to 261.8% on these larger timeframes.

Wave 4 - 87.90 to 83.74 - 4.16 pts. retracing wave 3 22.18% which is very close to .236 fib and it retraced to the prior 4th wave at 84.05. We also measure wave 4's against wave 2's. It retraced nearly 72% of wave 2, which is typical.

Wave 5 - 83.74 - ???????? I'll be looking for 91.81-93.98 based off the fib confluences. 91.81 would hit the upper green trend channel on Wednesday, February 26th.

Time:

Wave 1 About 24 TD's
Wave 2 About 24 TD's
Wave 3 About 133 TD's
Wave 4 About 26 TD's

We see that waves 1,2 and 4 are very similar in duration. As of the close today, wave 5 is only 11 TD's.

We would expect wave 5 to be at LEAST half of wave 1, preferably closer to the 24 TD's of wave 1.
12 TD's would be tomorrow and half wave 1
15 TD's would be Wednesday, February 26th, where the top of the trend channel comes into play with the FRZ and .618 TD's of wave 1.
24 TD's would put the top into March, and would probably be more toward the 1.618*1 FRZ, but that would be above the trend channel and unlikely.

DJIA and Gold

This chart is suggesting we should be long Gold and short the DJIA

Notice the bearish divergences on the latest high and the RSI and MACD uptrend lines have both broken.

We'll count this as a 12345 up and an A down. The move up should be a B wave and we should have a C wave down to the 10.50 area.

RUT & DJIA

The Russell 2000 and the DJIA have been the two weakest indices on this rise, so those are the indices we want to be short.

LNKD - Buying small amount of March 200 calls

I'm entering into a small order of LNKD March 22 200 calls for 7.50-8.00

Here's the previous chart from last October:

It is now near the 192 level and near the white parallel channel line.

QQQ - The Count I've Been Tracking

Wave 4 retraced exactly 23.6% of wave 3. I thought it would drop a little more to the 81 area, but alas it did not. The targets for wave 5 are within the two white horizontal lines. Now that wave 4 is presumably in, I can better get a feel for where wave 5 will end up.

The FRZ's for wave 5 now reside at right around 90.00 where wave 5 = .618*1 and 5 = .236(1+3) and the 93.60 area where wave 5  = 1 and wave = .382(1+3). I would give better odds to the second FRZ holding the move.

The SP-500 might make new highs with the Q's, but I don't believe the DJIA will.

The High of this move

The high of this move, assuming it is a correction higher, should come between tomorrow, February 11th and Tuesday, February 12th from SPX 1800-1830.

I'll be looking to get short again in that range, during that timeframe.

VXX Puts, Swing Trend Indicator and Daily Indicators

I should've held onto those VXX puts. Oh well, book profit when it's there.

The Swing Trend Indicator has given a tentative buy signal:

All daily indicators are now on BUY signals. Only an intra-day reversal will change them back to sell.

What happened today?

Today was a decent addition to the kickoff move, but it wasn't enough. I trust my market intuition probably more than I should, but something seemed wrong with this move so I took profit on my QQQ calls and VXX puts.

These results weren't spectacular, but they were wins, and that's what I try to focus on. Good setups where the risk is about .20 the reward. When you keep your risk/reward ratio low, even hitting 50% makes you money. I call these setups ELLIOTT HEDGED and I TRY to focus on these setups.

Why did I take these trades?

EW Theory along with short term indicators said it was time to take long positions on the market, even though the daily signals are still saying stay short. This could be a counter-trend rally vs. the ultimate downtrend, and today's action actually suggested that to me so I took profit. What's nice about getting quick, high returns is I can still get back in for an uptrend and make money without feeling like I'm chasing.

1. Volatility failed to produce a new high when the SP-500 produced a new low.
2. Sentiment, even on a short term basis, was heavily favored to more volatility. You can see this by just using the ATR (average true range) on index charts. There's no need to pay for sentiment indicators when you can gather the information when reading ATR correctly.
3. Tech has been the strongest index throughout this downtrend. I always want to get long the strongest and short the weakest. The weakest was the DJIA and that proved to be the best short of the main US indices.
4. It felt right. I had laid out my targets and the market actually reacted accordingly. It's not my job to tell the market where to trade, but rather decipher where it does trade. When the market reacts to levels I have highlighted, I listen to it. If it blows right through those levels, I try to figure out what it's thinking. I can't will the market to do what I wish, but I can "feel" if it's abiding.

Which brings me to why I closed my long positions.

I said previously that we got the kickoff move, and today was the follow-through of that move. My analysis and "feel" was correct. Today, I got a different "feeling", but this time it lacks analysis. The only analysis left for this move not to be ultimately bullish are the daily indicators, but even they are close to rolling over. What about the EW count? I came up with a short term bearish count where this is a B wave of a double zig zag. Under that scenario, today was either the top before another move to lower lows, or we'll gain a few more points, then drop. But who cares? Shorts are covered, longs are covered, and I'll wait for a new setup, because that's what I so. I identify great risk/reward setups and trade them.

I will put most of my account long tomorrow, at some point, either chasing or at a new low. I know the cycle high of the VIX is coming next week. A lot of other indicators show that a low (read bottom) is at hand.

Best of luck.

Jim