Thursday, February 13, 2014

IPM Trade Matrix Update - Trade 5 (Part 2)

Markets corrected yesterday (going sideways) and are correcting this morning. This is what we have been expecting - a minor pullback, to setup further rally. If this pull-back continues till the last day of the IPM turn window, IPM Trade Matrix will go leverage long because the risk will be minimized. 

However, at this point, it seems like the market will continue higher and a deeper pull-back will ensue from a higher price level. As along as market can stay above Feb 5 lows, we are in good shape and will most likely see all-time highs.

At the same time, there are certain risks roaming the market and can derail this rally:
  1. Debt ceiling issue, which needs to be resolved by Feb 27th (Good progress has been made on the resolution)
  2. 1929 analog chart. If true, this chart would mean that the markets are headed for a crash like situation
  3. Tapering of the QE. It remains to be seen how will the market react to future tapers.
While on one hand these issues are a source of concern, they have also strengthened the Wall of Worry which Bull markets likes to climb. Therefore, it will be interesting to see how things unfold in the near future. As always, UST's trade decisions will be based on a totally objective IPM Trade Matrix, so that our judgement is not biased by market conditions.   

IPM Trade Matrix 2014 Trades

TRADE - 1: (Long) = +2.6%
TRADE - 2: (Short) = +9.3%
TRADE - 3: (Long) - Non IPM Trade Matrix trade -0.2%
TRADE - 4: (Short - 1/31/14 to 2/5/14) +7.25% 

TRADE - 5: Long
Long TNA at 70  
Longs were initiated on 2/11/14 based on IPM Trade Matrix Trigger and Elliott Wave structure 

Condition: Bottom within IPM Turn Window 
Trigger: Rally above SP500 = 1789, DJIA = 15790, Russell 2000 = 111.5, Global Dow = 2401
Supporting Indicators: Up trend (8/4 Test has not been completed), Next IPM can be either Top/Bottom

Profit Target 1: 1870
Profit Target 2: 1930

Stop: Break below 1750
Trailing Stops: Will be identified in 1 week
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 3.5% (Entry = 1813 , Exit = 1750 , Risk = 3.5% )
Risk Reason: There are multiple reasons to be worried: 1929 stock market parallel, 8/4 Test to the downside is in process, and major IPM Bottom window is in process.  

Applicable Rule (There are 7 Rules in the IPM Trade Matrix. Following are applicable to the market right now): 
  1. Do not go long or short without trigger to prevent losses by market moving against you.  
  2. Exit half at profit objective 1. Exit full at profit objective 1 if proprietary continuation signals are not present.
  3. Observe stop-losses to minimize draw-downs

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. Did we see the higher low today that we were expecting during the major IPM Model turn window? I think so... Next few days will be very telling! We might be headed to all-time highs.


    1. If ur in tna wouldn't ur risk be more like 10.5%?

  2. Since trade entry/exit/stops are based on SP500 levels, risk is also based on SP500. As far as TNA is concerned, risk will be more than SP500 because of leverage but will vary with trade. Expected TNA risk balances out in the long run.

    As mentioned previously, this current trade started out as a relatively higher risk trade as compared to historical trades.



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