Friday, May 2, 2014

IPM Trade Matrix - Trade 9 (Part 2)

Market Overview

A very interesting day. Some might consider today's market action as non-eventful, but we might have seen the top today. We will know by tomorrow afternoon. There are certain developments that are pointing towards an important point in the market. These developments are manifesting themselves in three major indices:
  1. Global Dow
  2. Nasdaq
  3. SP500
Gobal Dow: Declined in a very clear 5-wave format from early April top. Since then the rally has been a 3-wave affair. Therefore, critical level is early April high. As long as market stays below that level, we have a very strong chance of acceleration to the downside over the new week or so.

Nasdaq: Nasdaq's decline out of mid April intermediate-term top has been a clear 5-wave. Nasdaq has rallied impressively over the last 2 days and has come very close to breaking the mid-April high. As long as mid-April high is not broken, we remain in a downtrend and look forward to a decline into the IPM turn window.
One interesting observation in this chart is the possibility of an inverted head and shoulders pattern. If this pattern is completed, we will see significantly higher prices. But with IPM Model turn date information, this looks like a very low possibility. We will see how things shape-up in the next few days.

SP500: SP500 completed a 8/4 test to the downside. In order to keep the test valid, market should not make a new high above early April top.

All of the above developments suggest that we are approaching a turning point. If market manages to decline soon, we will be looking forward to sharper decline. If market does not decline and takes out the highs in various indices, it would suggest that we have to be careful. In other words, one can also regard this area as a low risk short entry area.

Furthermore, short entry is supported by the IPM Model's turn window. 

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 - 3/18/14 to 4/11/14) = -18.1%
TRADE - 8: (Short - 4/23/14 to 4/28/14) +11%

TRADE - 9:
Bought TZA at 17.40. This is an aggressive short position. Shorts will be added as market starts declining.

When: Outside of IPM turn window in a downtrend - Date info e-mailed to subscribers
Next IPM Turn Window: Bottom 
Trigger: SP500 = 1864 (Conservative), 1881 (Aggressive), DJIA = 16420 (Conservative), 16520 (Aggressive), GDOW = 2505 (Conservative), 2519 (Aggressive)
Supporting Indicators: 8/4 Test completed to the downside. Downtrend in effect.  

Profit Target 1: -
Profit Target 2: -

RISK - Defined above in the commentary
Stop: SP500 = 1898 , DJIA = - , GDOW = -
Trailing Stops: - 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: - (Entry = - , Exit = - , Risk = - )
Risk Reason: Risk is high because we are outside of the IPM turn window. This makes it difficult to time the turn exactly.

Applicable Rule: 
  1. Sell (1/2) at profit objective 1 to minimize draw-down
  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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  1. you say recent highs, but that's vague. Can you simply put your entry and exit points?

  2. This is interesting, as the Devil's advocate, there was the Dow Theory buy signal last Thursday and most analysts say to scale in long. Stocktwits seems more neutral and twitter is leaning bearish as of Friday. I personally went to cash with the breach of 1875, GDOW 2515, monitoring Twitter's sentiment going from bullish to bearish, and boots hitting the ground in Ukraine (when press says anyone country is conducting "exercises", boots have hit the ground). I think we at least pull back to the 1850 support then 1814 in the SP500, but below that is 1785 and under that, Neverland. Upside I would look at 1915, maybe 1920 before reversal, but 1950 is lofty. Probability of going lower mush higher than going higher IMO. Be careful out there...Brad

  3. I agree with you Brad. Things are favoring the downside versus upside. Next week will be very interesting.


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