Thursday, September 1, 2011

Trading Algorithm Update - September 1, 2011

SP500 (Closing as of August 31, 2011) = 1218

Market: Bull to Neutral
Defining Level: 1207
Trend: Neutral
Defining Level: 1278
4/8 Trend Change Confirmation (Down to Up): Not Yet
Current Trade: Long Cost Basis: 1181
Profit Objective 1: 1216 (achieved)                               Trailing Stop (closing): 1178
Profit Objective 2: 1250                                                EW Stop: 1190
Status: Long from 1181 (average). Hold long till profit objectives are achieved or stops are hit
Next Trade / Model Based Approach: Will be determined as current trade matures in 1-2 weeks
Stop:                                                                                  Risk: 
Risk Associated with trade: 
Turn Window: August 23 (+/- 4 days) √®
Market bottomed in the turn window. We are now out of the turn window
1-       Market bottoms in turn window
2-       Market tops in turn window
3-       Market double bottoms and breaks out
4-       Market double tops and breaks down
Observations:  Markets currently have three possible potentials:
1- Markets are currently undergoing a 4rth wave correction, which will lead to a final rally in the next week up to 1270 level (SP500)
2- Markets are carving out a 1-2, 1-2 sequences. This will lead to a sharp rally till mid September
3- Markets have completed the rally and are about to start the next decline phase.
          Based on the analysis of the  market structure, sentiment readings and Market Matrix, I would side with the first possibility. 
First possibility: Suggests that after current consolidation is completed sometime this week, we will rally up to the downtrend demarcation level i.e. 1278. 
Second possibility: Too aggressive. It would suggest that we will soon embark on a rally to mid 1300s, which is a little too ambitious. 
Third possibility: Lower potential because we are not in a Bear market anymore and the trend is neutral. Therefore, benefit of the doubt should be given to the bulls.   

Interesting Observation: It would be very interesting to see if the markets rise into President Obama's speech to address the Congress on September 8, 2011, where he will talk about job growth, and then sell-off after the speech...

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1 comment:

  1. Good for you. However, if you had used UST's market timing with Option's 20X leverage then you will be up more than 200% in the same time frame. Please review the Newsletter section.

    Example: August 23 SPY @ 113. Buy 5 contracts of 100 share options for $1 premium with a strike price of 120. In one week you would have bagged 5x6x100 = $3000 - $50 in commissions. $2950 in less than 2 weeks is much more than 43% over a 6 month period with options.


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