Today we got the final confirmations of the downtrend with 3 week sell signals in the Qs and the SMH. Also, the low in the Dow violated the November 21 low finally eliminating the triangle possibility. The only obstacle to look out for now is an ending diagonal triangle in the Dow which could still allow for a sharp rally. We should expect at least one or two sharp rallies before the bottom, i.e. 2% to 4%, but just like the 11/13 rally last year that occured before the bottom, these should be false rallies.
A couple of weeks ago I said that if the Qs moved below 29.69, it would confirm the downtrend. That did occur on 2/12 but the Qs closed up for the day so that was not a reliable signal. However, I did use that signal to become more aggressive in opening new stock short positions while maintaining my index short positions at 50%. On 2/17 the Qs broke below the 2/12 low confirming that sell signal and I increased my index short positions to 75% while adding stock short positions. Today we got the final 3 week low signals for the Qs and the SMH and it would not surprise me to see another bounce tomorrow.
For the Qs 29.69 was the low of the opening day and opening 5 days of January, 28.74 recently was the 3 week low and the low of the opening 5 days of February. I do not trade the opening 5 day range of the month as a rule, but it can provide an early entry. Oftentimes, a break of the opening 5 day range of the month will determine the trend for the rest of the month. Also, watch the relationship of each month's 5 DOR. If each 5 DOR is higher than the last, the trend is up, regardless of what happens in between, and vice versa. Also, watch for false breaks. If a market breaks below the low of the 5 DOR and then reverses and breaks above the high of the 5 DOR, then that is usually a great buy signal. I hope that clarifies any confusion I may have caused.
Looking ahead to targets, I expect that the Qs will more than likely only test the November 21 low and not go much below, while the fibonacci extensions of the current elliott wave count in the Dow is pointing to 6356 as a target. However, the key market to watch will be the financials as they are likely to lead the recovery. The XLF is in wave v of 3 of (5), so we are looking at maybe one bounce followed by another new low. My target for the XLF is 6.00 to 6.90. Today it closed at 7.55, so it is getting close.
If you are long the SKF, I would not overstay as violent reversals are common with it. I have not been happy with the performance of many of the Proshares ETFs this year. The SKF overshoots in both directions and the DUG was a disaster. Compare to the DTO. There is debate about ETNs vs ETFs, but the DTO delivered and DUG did not. Also, I was ambushed with the early dividend announcement from Proshares without warning that stopped me out of 3 positions. I wonder if we will find out that there have been shenanigans in the ETF management later on.
To summarize, we are now in the heart of the downtrend in wave (5) down to complete primary wave 1 down. The risk of new short positions is rising so caution is advised. A market bottom is expected in March probably sometime between March 10 and March 17. Gold will likely top at the same time or a little early. There is no indication yet that the uptrend in gold is over and my target is now at 1029 to 1118. Today's pop in oil is probably not the bottom, but a bottom is in sight. The trade for March, April and May will be long stocks, short gold and long oil, barring a 3rd of a 3rd wave crash.