Wednesday, March 26, 2014

IPM Trade Matrix - Trade 7 (Part 5)

Market Overview

Today was a painful day, especially in small caps. It was so painful that I did not even want to look at the charts. But decided to publish relevant analysis for three primary reasons:
  1. Hiding from reality cannot solve anything. UST publishes what is actually happening, so that readers can learn in real-time. Anyone can post when he/she is right, but manning up when things don't go in one's favor is very important for long-term success.
  2. People want to read about what is happening. UST did not want to disappoint readers because of personal disappointment.  
  3. If UST has to be a long-term time-tested market analysis service, we need to be here in good times and bad times.
Although it was not a good day for equities, there are certain positives including strength in emerging markets, global stocks and pessimism coming into the US stock market (contrarion indicator) . 

Time has run-out for the market to bottom. And its now or never. Therefore, if critical levels (defined below) are broken to the downside, it would suggest that the trend has reversed from up to down. From a historical perspective, this has a low probability. In fact, if the market resumes to rally, it is possible that the market might continue its rally into May. Originally we were expecting a market top in April. This is a new development and will be shared as Elliott Wave structure develops. 

Following chart again shows the global stock market index on a longer-term time frame. It has been updated with latest data, and shows that the global index is trying to break out of the longer-term triangle since February. If this triangle is true and market holds above critical levels, market should rally. 

If the market fails to abide by the triangle scenario and makes a new low outside of the IPM Model turn window, we will exit the long trade. 

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 - 2/11/14 to 2/22/14) = +9.8%
TRADE - 6: (Long - 2/22/14 to 3/07/14) = +11.7%

TRADE - 7: Long
Long TNA at 82.45 ==> 82.7 (added longs on 3/19, 3/20, 3/25, 3/26) 
More longs were added based on IPM Turn Window risk reduction 
Trade was initiated on 3/18/14 based on IPM Trade Matrix Trigger. IPM Trade Matrix has been updated and future trades will include a new fail-safe to ensure trade entry near the break-out and reduce uncertainty.    

When: Bottom within IPM Turn Window - Date info e-mailed to subscribers
Next IPM Turn Window: Top / Bottom 
Trigger: SP500 = 1865, DJIA = 16409, GDOW = 2455 (will be a signal for full long)
Supporting Indicators: Up trend based on 8/4 test

Profit Target 1: 1915-1920
Profit Target 2: 1960
TNA target is separate. It might be hit early. If profit target is hit, aggressive trailing stops will be used & we will discuss it on the blog. 

 New low outside of IPM turn window based on Elliott Wave structure. Provisional Stops: SP500= 1840, GDOW = 2435, DJIA = 16125
Trailing Stops: Will be determined next week 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 1.34% (Entry = 1865 , Exit = 1840 , Risk = 1.34% )
Risk Reason: Geo-political uncertainty. Still within IPM Bottom window => Lower levels are possible.

Applicable Rule: 
  1. Sell (1/2) at profit objective 1 to minimize draw-down (aggressive trailing stops at profit objective)
  2. No Trade in opposite direction
  3. Do not go long or short without trigger to prevent losses by market moving against you.  
  4. Observe stop-losses to minimize draw-downs
  5. If stops are hit ==> Wait on the sidelines for new opportunity near IPM Turn window

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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