Thursday, February 6, 2014

IPM Trade Matrix - Trade 4 (Part 4) and Market Overview

With market's morning decline, one can count the Elliott Wave structure as complete on the near term basis (shown below). 

This structural development brings us to the next important questions i.e. whether market will resume its rally immediately or does it need one more decline phase. Answer will depend on how one interprets the market structure. For example:

  1. If one thinks that the market is still in an uptrend (which is true till 8/4 test is complete), one might assume that this decline was just a 3-wave zig-zag. And will be followed by another rally to new all-time highs (Blue Line)
  2. On the other hand, if one thinks that the market has entered a downtrend, it seems like market should rally for the next few days followed by new lows to complete the 5-wave down structure. (Black Line)
In order for for scenario 2 to be valid, markets should rally above following critical levels:
  • SP500: 1775
  • DJIA: 15800
  • Comp: 4053
  • IWM: 111.15

In short, it is a very interesting time in the market. As for the IPM Trade Matrix, we have completed two successful short trades between two turn dates. Therefore, per IPM Trade Matrix, short side will not be traded for at least next few days. Next trade will be based on the IPM Turn Window's timing and market matrix analysis. 

IPM Trade Matrix Trades

TRADE - 1: (Long) = +2.6%
TRADE - 2: (Short) = +9.3%
TRADE - 3: (Long) - Non IPM Trade Matrix trade = -0.2%

TRADE - 4: Short
Long TZA (short ETF) at 18.23 ==> 18.57 (shorts added) ==> Exited on 2/5/14 (3/4) @ 19.96 and Exited on 2/5/14 (1/4) @ 19.76 ==> +7.25% 
Short positions were added on 1/31/14, 2/3/14 and 2/4/14 based on Elliott Wave structure and break below critical levels.  

Condition: Outside IPM Turn Window (Re-entry)
Trigger: Test of ~1785 (SP500) and decline below 1769 (SP500). Decline trigger was based on EW analysis and other proprietary levels. 
Supporting Indicators:  Initial decline was impulsive (5-wave). Next IPM window is a Bottom and is 1-2 weeks away. Details of IPM turn window e-mailed to subscribers. 

Profit Target 1: 1725 - 1730 - Although SP500 did not meet this target, minimum requirement of wave v was complete, and TZA reached more than 10% profit level this morning. As a result, trade was exited at trailing stop level. Although we did not pick the exact bottom, we are now sitting on a handsome profit and followed the model.
Profit Target 2: 1670 

Stop: Above 1770
Trailing Stops: 1751 - Based on Elliott Wave analysis (will be updated on a regular basis)
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0% (Entry = 1785, Exit = 1770, Risk = No Risk)
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: Do not go long or short without trigger to prevent losses by market moving against you.  

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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  1. Sorry, may I ask if u are saying for scenario 1 to be valid instead of scenario 2?

  2. Sorry for the confusion. I meant to say: "markets should not rally", instead of "markets should rally "



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