Wednesday, May 7, 2014

IPM Trade Matrix - Trade 9 (Part 5)

Market Overview

Today's market  action saw a triple digit move and another sharp reversal. this is the second reversal in last few days. As mentioned before, market's triple digit moves symbolize a change in character. This character change could result in a sharp rally, but the possibility of a sharp decline is fairly low.

Ending diagonal pattern was shown yesterday. It is possible that today's rally resulted in a back test of the ending diagonal's bottom line in SP500.

At the same time, small caps & Nasdaq is forming a long-term head and shoulders. This head and shoulders could result in a sharp decline, and will pull the mega-caps along with it.

From an Elliott Wave perspective, it seems like market is tracing out a sequence of 1s and 2s. It is possible that as the next wave down (wave 3) start, it could lead to a bottom during the next IPM 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 17.35. This is an aggressive short position. Shorts were added on 4/30 and 5/2. 

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

Profit Target 1: 1830
Profit Target 2: 1770

Stop: SP500 = 1885 , DJIA = 16682 , GDOW = 2523
Trailing Stops: - 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0.2% (Entry = 1881 , Exit =1885 , Risk = 0.2% )
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. "This character change could result in a sharp rally, but the possibility of a sharp decline is fairly low."

    You have been saying recently that the change in character will most likely lead to a decline. Here you are saying the opposite. Can you clarify this? Thank you for your insight.

  2. By this sentence I just meant that market character is changing, and a big move is coming. This is a standard observation and can be made by any astute market participant. However, they will keep open the possibility of decline and rally both at the same time. As far as I am concerned, I wanted to bring this up.

    But IPM trade matrix is bearish and short with 8/4 trend confirmation to the downside. The short position will remain in place till stops are hit. Stops are in place to ensure risk mitigation, in case market decides to head to new highs (very low probability).

    1. So is it low probability down. ... hi probability up... or vice versa? Another advisor is calling for a head fake move higher... with an epic failure thereafter. (Not new highs... but good for further short entry on that short lived rally). Based on Sp futures... and USD/jpy cross currency positioning.. 102 is the key..

      Any thoughts are appreciated.. every time I feel confident of visualizing the end result out a few days... I realize how wrong I am.. getting frustrated.. which I guess is the point of the powers that be that make this market...

    2. High probability of a down move. Further head fake rally is possible but as you know the IPM turn date, it is a very low probability. Next 2 days will clear up a lot of things.

  3. 1886 has been hit (stop was at 1885) - does that mean this trade is over? That would be 3 losing trades out of 9...which is good, but far from the 95% accuracy.

  4. With market still outside of iPM turn window and near all time highs, trade has not been exited. It is looking like the ending diagonal pattern is still not complete. It should complete below 16650 in djia, 1900 in Spx.

    As mentioned before trades outside of IPM turn windows can be very tricky.

  5. Might be helpful to remove Stops from your analysis or include that it has to be during IPM turn window because some might think that when you say Stop 1885 they should be getting out.

  6. stops are only valid inside IPM turn window?

  7. Exit outside IPM turn window is governed by Elliott Wave stops because timing information is not available. timing information related to upcoming bottom is available.

    Therefore, elliottwave analysis demands a holistic analysis. For example, we have been tracking the ending diagonal pattern. This pattern required a sharp impulsive decline. However, market action over the last few days was not impulsive. This observation, in conjunction with max Elliott wave level for ending diagonal pattern to materialize, allowed us to give market leeway till max level, especially when we had the information of upcoming IPM bottom.

    This leeway was highlighted in twitter, where top target along with time was highlighted today. So far, market turn has been impulsive. Now the market needs to continue a sharp decline.

  8. So what would the Stop be outside the IPM turn window?


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