The uptrend has ended. The confluence of technical factors: Elliott Wave, time cycles, negative divergences among oscillators and other indicators, and the general sentiment that the rally had gone on for a bit too long, led to a huge washout today that took out the lower trendline of the rising wedge in a single hourly candle. For the next two weeks, possibly more, the trading mentality should be bearish, shorting rallies and holding short positions through the declines.By my count, this decline should be a relatively small correction (in wave terms, B of B) that won't go near the March lows. The target range for this correction is S&P 750-800, with a potential time target of May 5th, which marks 60 days after the 667 low (or failing that, May 20th). Andy at PTV Investing has long targeted mid-May as a major cycle turn (one example here), and that lines up well with the potential timing of the C wave of Primary B. But this is to anticipate. For now, let's take off the rose-colored glasses of the past 1-1/2 months and recognize that it might get a bit ugly from here.
Our portfolio went from net long to net short overnight. We sold all our long positions, some of them for less than ideal prices as they gapped down at the open. Happily, all but one (DIG) were sold for gains, and in a couple of cases the profits were handsome. We bought SRS, but missed SDS when it gapped and ran.
| Current Holdings | ||||||
|---|---|---|---|---|---|---|
| Ticker | Basis | Closing Price |
Perf. | Sell-Stop | Additional Exit Guideline | Chart |
| SRS | 29.63 | 33.24 | +12.2% | 25.74 | N/A | Chart |
Let's let the market settle down for a bit. Ideally we get a consolidation day tomorrow, which will allow us to get in some additional short positions Wednesday or Thursday. You can always enter a short position, risking to Friday's highs, but at this point the risk is so wide that you won't be able to take on many shares, and the downward move so extended that there's a good chance the market rallies 10-20 points from here. Nevertheless, it's a low-risk proposition overall as the uptrend did break definitively. And if you ended up buying some put options at today's open, congratulations. It's difficult because at the time it seems like you're overpaying, but when these downtrends begin, they pick up steam so fast that time is of the essence. The early moves end up being profitable/capital-preserving moves.
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