Saturday, January 25, 2014

IPM Trade Matrix - Trade 2 (Part 2)

Yesterday's market action again validated the accuracy of the Inflection Point Model and that the IPM Trdae Matrix is proving out to be a very robust trading strategy. Since it can adapt to different market conditions in advance, it could generate significant results in any market. 

As for the market, yesterday's decline did take many by surprise. Only people who were not surprised are the ones who were expecting a market correction since June of last year. And for them it might be a great buying opportunity. But like always majority will again lose out on this market. People will start buying this dip only to find out that this market has further downside left, once they lose hope market will start rallying.

In the interim, market is approaching the 8/4 Test scenario. First step of setup will be complete if the market declines below 1770 level. This will be followed by a test. If the test fails and market break below critical levels, we will enter a downtrend. Although one can come up with many scenarios, we should not predict the future without getting hard facts because each subsequent step has multiple options, and then each option can have multiple reaction. Therefore, instead of confusing ourselves with options, we should take it one day at a time.

For the time being, market is declining. It is not in a downtrend but could enter a downtrend in February. We have 3 proprietary buy signals yesterday and it is possible that we might see a sharp rally towards the end of this month. But if January ends negative, there is a very high probability that it will be bad for the entire year. 

SP500 (1/22/14) = 1790
DJIA (1/22/14) = 15879

Trade 2 in Process 

TRADE - 1: Summary of Trade 1 = +2.6%

Long TZA (short ETF) at 16.85
Short positions were added on 1/23/14 and 1/24/14 based on IPM Top window expiration and subsequent break below critical level (Trade 1 - risk realized)

Condition: High within IPM turn window - Top. Next IPM window is a Bottom and is 3+ weeks away.  
Trigger: Decline below 1835 (SP500), below 16400 (DJIA) and below 2473 (Global Dow)
Supporting Indicators: Lack of proprietary momentum thrust in upwards direction, Influence of weekly IPM and High within IPM turn window
Note: Although Nasdaq and Russell 2000 did not break below critical levels on Thursday, 3 indices confirmed the trend. Russell and Nasdaq also confirmed on Friday (1/24/14)

Profit Target 1: 1770
Profit Target 2: 1724

Stop: Rally above SP500 = 1849, DJIA = 16498, Comp = 4246, Rut = 1181 (3 of 4)
Trailing Stops: SP500 = 1836, DJIA = 16310, GDOW = 2470 (Trailing stops will be updated next week - 1/31/14) 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0% (Entry = 1835, Exit = 1836, Risk = 0%)
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: If short with last IPM ~2 weeks ago & next IPM a bottom, review proprietary momentum indicator (combination of 5 indicators). If momentum = 1, stay till Profit 2, else exit all at profit 1 and re-enter later. 

Note: IPM Trade Matrix Trades will be posted in the first half of 2014. This is an experiment to understand and enhance the capabilities of this Matrix.

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