Go With The (Short Term) Flow

After a two weeks' retreat, I come back to find the market prices nearly unchanged. Although we fell to around 1040 for the S&P, we are now back to the 1093 level I last looked at.

Because I was not keeping on top of my trades, I failed to capitalize on the dip when the prices fell. Although the set up for a lot of my trades played out nearly perfectly, because I did not exit in a timely fashion, I gave up some excellent profit opportunities. Instead, I was forced to exit a few of my positions at a loss as the S&P gained 20+ points today. What is the motto of the story? If you are actively managing your investments, do not neglect them and hope for the best. I read somewhere "Hopium is a drug that will destroy any trader".

Moving forward, I believe we can see the S&P reach 1100-1110 level based on the chart below. As MarketMike already mentioned in the previous post, this upwards move looks very much like an ABC correction to an overall downtrend. However, after the ABC correction, the overall trend could reverse and the upwards move could continue, in which case my target would be 1160-1170 before the next correction. In either case, there is still room to capitalize on this wave C which I believe is not over yet.

HEIKIN ASHI:


CANDLESTICK:


As you can see, the Stochastic is showing a very bold bullish momentum coupled with improving breadth ratios. The Heikin Ashi chart - which, in my opinion, shows the trends in a much more clear fashion (compare to the candlestick chart) - shows that the bullish trend is strengthening (longer bullish bars with shorter to same length tails). Finally, the price broke above the 21-day MA which generally serves as a pretty strong resistance.

So, I am going long SPY with partial exit at around 1100. It is a tight trade with a potential for a mere 3-4%. The time frame is also very small and my time studies indicate we should reach the target in as little as a week.

My reasoning is that we are once again approaching cross roads where the market could go either way. I would rather take small profits and wait while the market makes up its mind than take big bets and have those bets fail. The time for big bets will come, but it is not now.

-Wown
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