IPM Trade Matrix - Trade 4 (Part 1)

IPM Turn Window Information has been e-mailed to Subscribers

Trade 4, as mentioned previously will be short trade because of reasons mentioned previously.

Trade 4 can be a very difficult trade because of 2 reasons:

1- Market can resume its decline phase at any time
2- Market's correction (up-move) can take on multiple forms

Primarily, there are two triggers for this trade outside of turn window. Elliott Wave analysis is one method.

According to Elliott Wave analysis there are two possibilities for this current decline:

1- ABC: This would require sharp rally to 1810 level
2- 12345: This would require a break below today's low in the near future

As per Global Dow's wave structure, market has breached the low level and will start following scenario 2. As far as other indices are concerned, they are kind of divided between scenario 1 and 2. We will surely find out over the next few days.


IPM Trade Matrix Trades

TRADE - 1: Summary of Trade 1 (Long) = +2.6%

TRADE - 2: Summary of Trade 2 (Short) = +9.3%

TRADE - 3: Long
Long TNA at 70.28 ==> Exit at 70.14 ==> -0.2% ==> -0.03% of portfolio

TRADE - 4: Short
Long TZA (short ETF) at 18.23 
Short positions were added on 1/31/14 based on Elliott Wave structure. More shorts might be added if market either breaks below critical levels or rises to critical levels. Breaking below will confirm scenario 1, rallying higher will confirm scenario 2. 

TRADE CONDITIONS
Condition: Outside IPM Turn Window (Re-entry)
Trigger: Test of ~1810 (SP500), ~16120 (DJIA). Decline trigger will be determined based on EW analysis and other proprietary levels once we test these level.
Supporting Indicators:  Next IPM window is a Bottom and is 1-2 weeks away. Details will be emailed to subscribers over the weekend

PROFIT TARGETS
Profit Target 1: 1725
Profit Target 2: 1670 

RISK
Stop: Above high - Max would be around 1825
Trailing Stops: N/A
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 2.2% (Entry = 1785, Exit = 1825, Risk = 2.2%)
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: Do not go long or short without trigger to prevent losses by market moving against you.  

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.

IPM Trade Matrix - Trade 3 (Part 2)

Market Overview

Today Fed again reduced its quantitative easing by $10B. Although on paper it is a bearish development because lack of free money can spell trouble for global markets, this decision might result in a short term market rally. A rally will be a surprise for majority of market participants. A quick rally will pull-in new money from the sidelines. This will setup a better opportunity to short the market, at IPM trade matrix's target areas. 

From an Elliott Wave perspective, it seems like the market just completed a 5-wave down move (as predicted in yesterday's update). Completed 5-wave declines generally give way to a sharper rally. The only problem in playing this counter-trend rally is that we don't know what shape it will take because of multiple options. 

Since there is a lot of risk in going long and it was mentioned that one should play the counter-trend rally with very small amount of capital, a long trade was initiated today with only ~12% of portfolio. In total, this trade will risk less than 0.5% of portfolio and will be exited in a matter of days (1-3). 

Reasoning for this trade stems from a completed Elliott Wave structure, buy signals from proprietary indicators and potential for the 8/4 Test's second phase. Please note that this is just a small counter-trend trade and the position size is so small that it will not impact the gains gained through IPM trade matrix trades over the past few weeks. 

From the 8/4 Test perspective, the first step is almost complete with the test of 1770 level. Now the second step would be the Test of low 1800s. If the test fails and market break below critical levels, we will enter a downtrend. 

Note: If market does enter the downtrend, we will switch to the Downtrend section in the IPM Trade Matrix. This would mean that we will enter one more trade by the next IPM Bottom window.  

Overall Trade 3 in process (Not related to Trade Matrix) - Wanted to utilize wave structure completion point and extra cash availability in the portfolio with minimum risk

Entry TNA = 70.2 (SP500 = 1780)

Potential Exit SP500 = 1800s

IPM Trade Matrix Trade  on the horizon 

TRADE - 1: Summary of Trade 1 (Long) = +2.6%
TRADE - 2: Summary of Trade 2 (Short) = +9.3%

TRADE - 4: Short


TRADE CONDITIONS - 
Condition: Outside IPM Turn Window (Re-entry)
Trigger: Test of ~1810 (SP500), ~16120 (DJIA). Decline trigger will be determined based on EW analysis and other proprietary levels once we test these level.
Supporting Indicators:  Next IPM window is a Bottom and is 1-2 weeks away. Clearly impulsive EW pattern

PROFIT TARGETS
Profit Target 1: N/A
Profit Target 2: N/A 

RISK
Stop: N/A
Trailing Stops: N/A
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: N/A 
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: Do not go long or short without trigger to prevent losses by market moving against you.  

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.

IPM Trade Matrix - Trade 3 (Part 1)

Market Overview

Since the goal of IPM Trade Matrix is to make trading a system with out emotions and generate consistent results, we will not enter a long trade at this point in time. Please note that a sharp snap back rally might take place over the next few days following Fed's FOMC meeting today and in-line with month end seasonality trends. 

From an Elliott Wave perspective, it seems like the market was tracing out wave 4 over the last 2 days. This will be followed by another decline, which will complete a clear 5-wave impulsive decline pattern. This decline will give way to a sharper rally. The only problem in playing this counter-trend rally is that we don't know what shape it will take because there are 11 different correction patterns. If one want's to play the counter-trend rally, they should use very small amount of capital with very tight stops so that losses do not wipe out gains. In any case, impulsive declines suggest that the trend is turned and the 8/4 test completion will validate the trend change.

Potential target for this decline to end is in 1760s. However, several indices have already completed their 5-wave decline. As a result, not all indices will make lower lows.

From the 8/4 Test perspective, Market has initiated the 8/4 Test. First step is almost complete with the test of 1770 level. Now the second step would be the Test by testing low 1800s. If the test fails and market break below critical levels, we will enter a downtrend. 

Note: If market does enter the downtrend, we would have to switch to the Downtrend section in the IPM Trade Matrix. This would mean that we will enter one more trade by the next IPM Bottom window.  

Trade 3 on the horizon 

TRADE - 1: Summary of Trade 1 (Long) = +2.6%
TRADE - 2: Summary of Trade 2 (Short) = +9.3%

TRADE - 3: Short


TRADE CONDITIONS - 
Condition: Outside IPM Turn Window (Re-entry)
Trigger: Test of 1810 (SP500), 16120 (DJIA). Decline trigger will be determined based on EW analysis and other proprietary levels once we test these level.
Supporting Indicators:  Next IPM window is a Bottom and is 1-2 weeks away. Clearly impulsive EW pattern

PROFIT TARGETS
Profit Target 1: N/A
Profit Target 2: N/A 

RISK
Stop: N/A
Trailing Stops: N/A
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: N/A 
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: Do not go long or short without trigger to prevent losses by market moving against you.  

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.

IPM Trade Matrix - Trade 2 (Part 3)

Market Overview

Recent market action has not only validated the accuracy of the Inflection Point Model (by the grace of God), it is also supporting the argument that the IPM Trade Matrix is a robust trading mechanism because it can adapt to different market conditions in advance (like it did recently). The goal of IPM Trade Matrix is to make trading a system with out emotions and generate consistent results. Consistency is the key to success in the world of investing.

By every passing day, market action gives the feeling that this correction could be a start of something big. Market has initiated the 8/4 Test. First step is almost complete with the test of 1770 level. Now the second step would be the Test. If the test fails and market break below critical levels, we will enter a downtrend. By the ways things are going right now, we might enter a downtrend in February. 

If market does enter the downtrend, we would have to switch to the Downtrend section in the IPM Trade Matrix. This would mean that we will enter one more trade by the next IPM Bottom window.  

For the time being, market's structure is nearing completion before rallying for few days. Near term structure looks very impulsive. Whereas, in SP500 it is missing only one more down move before the rally can start, wave structure looks complete for Nasdaq and Russell. 

It is possible that the rally might start on the Fed's news and might till the end of January. We will continuously evaluate the market structure to identify critical levels for counter-trend rally completion. But if January ends negative, there is a very high probability that it will be bad for the entire year. 

Trade 2 Complete 

TRADE - 1: Summary of Trade 1 (Long) = +2.6%

TRADE - 2: Summary of Trade 2 (Short) = +9.3%
Long TZA (short ETF) at 16.85 ==> Exit at 18.41 ==> +9.3%
Short positions were added on 1/23/14 and 1/24/14 based on IPM Top window expiration and subsequent break below critical level (Trade 1 - risk realized)

TRADE CONDITIONS
Condition: High within IPM turn window - Top. Next IPM window is a Bottom and is 3+ weeks away.  
Trigger: Decline below 1835 (SP500), below 16400 (DJIA) and below 2473 (Global Dow)
Supporting Indicators: Lack of proprietary momentum thrust in upwards direction, Influence of weekly IPM and High within IPM turn window
PROFIT TARGETS
Profit Target 1: 1770
Profit Target 2: 1724

Note: Exited all positions at Profit Target 1 because of Rule # 3: Exit all shorts at Target 1 if decline continuation signal is not present from proprietary momentum indicator and buy signals generated by key indicators. Moreover, Elliott Wave count is close to near-term completion. Re-evaluate situation in next 2-3 days to be ready for another short entry. 
RISK
Stop: Rally above SP500 = 1849, DJIA = 16498, Comp = 4246, Rut = 1181 (3 of 4)
Trailing Stops: SP500 = 1836, DJIA = 16310, GDOW = 2470 (Trailing stops will be updated next week - 1/31/14) 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: N/A 
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: If short with last IPM ~2 weeks ago & next IPM a bottom, review proprietary momentum indicator (combination of 5 indicators). If momentum = 1, stay till Profit 2, else exit all at profit 1 and re-enter later. 

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.

IPM Trade Matrix - Trade 2 (Part 2)

Overview
Yesterday's market action again validated the accuracy of the Inflection Point Model and that the IPM Trdae Matrix is proving out to be a very robust trading strategy. Since it can adapt to different market conditions in advance, it could generate significant results in any market. 

As for the market, yesterday's decline did take many by surprise. Only people who were not surprised are the ones who were expecting a market correction since June of last year. And for them it might be a great buying opportunity. But like always majority will again lose out on this market. People will start buying this dip only to find out that this market has further downside left, once they lose hope market will start rallying.

In the interim, market is approaching the 8/4 Test scenario. First step of setup will be complete if the market declines below 1770 level. This will be followed by a test. If the test fails and market break below critical levels, we will enter a downtrend. Although one can come up with many scenarios, we should not predict the future without getting hard facts because each subsequent step has multiple options, and then each option can have multiple reaction. Therefore, instead of confusing ourselves with options, we should take it one day at a time.

For the time being, market is declining. It is not in a downtrend but could enter a downtrend in February. We have 3 proprietary buy signals yesterday and it is possible that we might see a sharp rally towards the end of this month. But if January ends negative, there is a very high probability that it will be bad for the entire year. 

Markets
SP500 (1/22/14) = 1790
DJIA (1/22/14) = 15879

Trade 2 in Process 

TRADE - 1: Summary of Trade 1 = +2.6%

TRADE - 2
Long TZA (short ETF) at 16.85
Short positions were added on 1/23/14 and 1/24/14 based on IPM Top window expiration and subsequent break below critical level (Trade 1 - risk realized)

Condition: High within IPM turn window - Top. Next IPM window is a Bottom and is 3+ weeks away.  
Trigger: Decline below 1835 (SP500), below 16400 (DJIA) and below 2473 (Global Dow)
Supporting Indicators: Lack of proprietary momentum thrust in upwards direction, Influence of weekly IPM and High within IPM turn window
Note: Although Nasdaq and Russell 2000 did not break below critical levels on Thursday, 3 indices confirmed the trend. Russell and Nasdaq also confirmed on Friday (1/24/14)

PROFIT TARGETS
Profit Target 1: 1770
Profit Target 2: 1724


RISK
Stop: Rally above SP500 = 1849, DJIA = 16498, Comp = 4246, Rut = 1181 (3 of 4)
Trailing Stops: SP500 = 1836, DJIA = 16310, GDOW = 2470 (Trailing stops will be updated next week - 1/31/14) 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0% (Entry = 1835, Exit = 1836, Risk = 0%)
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: If short with last IPM ~2 weeks ago & next IPM a bottom, review proprietary momentum indicator (combination of 5 indicators). If momentum = 1, stay till Profit 2, else exit all at profit 1 and re-enter later. 

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.

IPM Trade Matrix - Trade 2 (Part 1)

Overview

Market realized the risk that we were highlighting on this blog for over a week now. Markets topped within IPM top window and then failed to rally above that level again. Since yesterday was the last day of the IPM top window, it gave way to a sharp decline today. This decline changed all the initial bullish estimates. Now we will adapt to the situation as it arises.

One good thing that this experience has taught us is that the IPM Turn window really works and IPM Trade Matrix is a very robust trading strategy. It can adapt to different market conditions rather quickly and therefore, can generate results in any market. We will see how it performs over the next few months.


Trade 1 Ends and Trade 2 Starts

Markets
SP500 (1/22/14) = 1828
DJIA (1/22/14) = 16197

TRADE - 1
Long TNA at 76.25 (original) ==> 76.6 (new) ==> Exit at: 78.6 ==> +2.6%
Long FAS at 92.30 (original) ==> 91.6 (new) ==> Exit at: 88.4 ==> -3.5%
Long TSLA at 171.2 ==> Exit at: 177.2 ==> +3.5%
Long positions were added on 1/14/14 & 1/16/14 based on IPM Bottom window expiration and low risk scenario

Summary of Trade 1 = +2.6%


TRADE - 2
Long TZA (short ETF) at 16.55
Short positions were added on 1/23/14 based on IPM Top window expiration and subsequent break below critical leve (risk realized)

Condition: Next IPM Window is a Bottom and is 3+ weeks away. High within IPM turn window and no new high.
Trigger (Updated at End of Day on 1/9/14): Decline below 1835 (SP500), below 16400 (DJIA) and below 2473 (Global Dow)
Note: Although Nasdaq and Russell 2000 did not break below, 3 indices confirmed the trend
Profit Target: 1770

RISK
Stop: Rally above SP500 = 1849, DJIA = 16498, Comp = 4246, Rut = 1181 (3 of 4)
Trailing Stops: EW & Trailing stops will be determined by 1/31/14 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk: 0.7% (Entry = 1835, Exit = 1849, Risk = 0.7%)
Risk Reason: No significant risk because upcoming turn date is a bottom.

Applicable Rule: If next minor IPM turn window is within 2 weeks then wait for a confirmation break before exiting longs - Rule number 2 triggered. Exited longs and added shorts.


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.

IPM Trade Matrix - Trade 1 (Part 7)

Market Overview:
Market is still going sideways. This kind of market action suggests that the market is getting ready for a blast higher. Although yesterday's Chinese PMI data will be brought forward as a reason of concern and the sell-off, there is nothing wrong with the market structure suggesting that this news will also be bought. 

An interesting development is in the Dow's Elliott Wave structure. Its recent sideways action has kind-of traced out a triangle. Triangles usually break in the direction of the trend. This triangle could also result in a sharp rally, as long as Dow can hold above: 16237  

On a closer analysis, triangle's sub-waves are also divided into 3s and are overlapping. This is a classic example of a corrective wave. And suggests that the bigger trend has not turned down yet.

Overall, it seems like market wants to give Chairman Bernanke a standing ovation before his departure from the Fed towards the end of this month.

First Trade of 2014 is in process:

Trade Observations

1. IPM Top date did its job, as market went sideways after topping on that date. IPM Top date was scheduled for Jan 15 and the latest market top did occur on Jan 15. We will see if market can break above this top to mitigate all the risks!
2. Although DJIA did close below its trailing stop, other indices did not close below their respective levels. As a result, we are still long and have not been stopped out. 
3. As we come closer to the next IPM turn date, we will take profits even if the market did not reach our target. But that time is few weeks away. So market has ample time to show its real character.

Markets
SP500 (1/22/14) = 1845
DJIA (1/22/14) = 16375

TRADE
Long TNA at 76.25 (original) ==> 76.6 (new)
Long FAS at 92.30 (original) ==> 91.6 (new)
Long TSLA at 171.2
Long positions were added on 1/14/14 & 1/16/14 based on IPM Bottom window expiration and low risk scenario

Condition: Next IPM Window is Top or Bottom
No. of Trades between turn windows: 1
Triggered (Updated at End of Day on 1/9/14): Rally above 1837 (SP500) and above 16450 (DJIA)
Profit Target: 1885-1890 (Will be evaluated as Elliott Wave structure matures)

RISK
Stop: Below SP500 = 1816, DJIA = 16217, Comp = 4090, Rut = 1141 (3 of 4)
Trailing Stops (updated on 1/23): Close Below SP500 = 1835, DJIA = 16442, Comp = 4170, Rut = 1160 (3 of 4) 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk (1/15/14): 0% (Entry = 1837, Exit = 1835, Risk = 0%)
Risk Reason: IPM Top is approaching. Market needs to hold during this top window, otherwise we can see a serious correction. Rise above 1850 will neutralize this risk

Applicable Rule: If next minor IPM turn window is within 2 weeks then wait for a confirmation break before exiting longs. 

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.

IPM Trade Matrix - Trade 1 (Part 6)

Market Overview:
Market has been going sideways. This kind of market action suggests that the market is getting ready for a blast higher. There is no significant hindrance which can stop the market from rallying. Although market driving news typically comes from the left field, market structure is suggesting smooth sailings for the next 2-3 weeks. Details about the next market turn date has been e-mailed to subscribers. Overall, it seems like market wants to give Chairman Bernanke a standing ovation before his departure from the Fed towards the end of this month.

As per Elliott Wave structural analysis, market is setting up for a sharp rally (wave 3 of a minor degree) - possibly into the early February.

As far as the IPM Trade Matrix trading is concerned, we are still tracking this trade below and will continue to do so till we exit the trade.

First Trade of 2014 is in process:

SP500 (1/16/14) = 1844
DJIA (1/16/14) = 16414

TRADE
Long TNA at 76.25 (original) ==> 76.6 (new)
Long FAS at 92.30 (original) ==> 91.6 (new)
Long TSLA at 171.2
Long positions were added on 1/14/14 & 1/16/14 based on IPM Bottom window expiration and low risk scenario

Condition: Next IPM Window is Top or Bottom
No. of Trades between turn windows: 1
Triggered (Updated at End of Day on 1/9/14): Rally above 1837 (SP500) and above 16450 (DJIA)
Profit Target: 1885-1890 (Will be evaluated as Elliott Wave structure matures)

RISK
Stop: Below SP500 = 1816, DJIA = 16217, Comp = 4090, Rut = 1141 (3 of 4)
Trailing Stops (updated on 1/15): Close Below SP500 = 1835, DJIA = 16442, Comp = 4170, Rut = 1160 (3 of 4) 
Typical IPM Trade Matrix Risk: 1.5%
Actual IPM Trade Matrix Risk (1/15/14): 0% (Entry = 1837, Exit = 1835, Risk = 0%)
Risk Reason: IPM Top is approaching. Market needs to hold during this top window, otherwise we can see a serious correction. Rise above 1850 will neutralize this risk

Applicable Rule: If next minor IPM turn window is within 2 weeks then wait for a confirmation break before exiting longs. 

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.